Chapter 4 from Textbook Ts Grewal 1 (2014) for Class 12 ACCOUNTANCY

Question 68:

Answer:

Revaluation Accounts
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Stock		750	Building	5,000
Provision for D. Debts	500
Less: Old Provision	400	100
Furniture		500

Profit on Revaluation transferred to
Rajesh Capital		2,190
Ravi Capital		1,460

		5,000		5,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Rajesh	Ravi	Raman	Particulars	Rajesh	Ravi	Raman
				Balance b/d	29,000	15,000
				Revaluation	2,190	1,460
Balance c/d	31,190	16,460	16,000	Cash			16,000
(before and just went of
Goodwill)
	31,190	16,460	16,000		31,190	16,460	16,000
Rajesh’s Capital			1,635	Balance c/d	31,190	16,460	16,000
Raman’s Capital			1,635	Raman’s Capital	1,635	1,635
Balance c/d	32,825	18,095	12,730
	32,825	18,095	16,000		32,825	18,095	16,000

Balance Sheet as on March 31, 2014 after Raman’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		38,500	Cash (2,000 + 16,000)		18,000
Outstanding Rent		4,000	Stock (15,000 – 750)		14,250
Capital A/cs:			Prepaid Insurance		1,500
Rajesh	32,825		Debtors	9,400
Ravi	18,095		Less: Provision for D. Debts	500	8,900
Raman	12,730	63,730	Machinery		19,000
			Building (35,000 + 5,000)		40,000
			Furniture (5,000 – 500)		4,500
		1,06,150			1,06,150

Working Notes-

WN1

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2

Calculation of Goodwill

Actual Capital of all Partners before adjustment of goodwill = Rajesh’s Capital + Ravi’s Capital + Raman’s Capital

= 31,190 + 16,460 + 16,000

= Rs 63,650

Capitalised value on the basis of Raman’s share

Raman’s share of Goodwill

WN3

Adjustment of Raman’s share of goodwill

Rajesh and Ravi each Capital Accounts will be credited by

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Raman’s Capital A/c	Dr.		3,270
To Rajesh’s Capital A/c				1,635
To Ravi’s Capital A/c				1,635
(Raman’s share of goodwill adjusted)

WN4

Distribution of Profit on Revaluation (in old ratio)

Question 69:

Revaluation Accounts
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Stock		750	Building	5,000
Provision for D. Debts	500
Less: Old Provision	400	100
Furniture		500

Profit on Revaluation transferred to
Rajesh Capital		2,190
Ravi Capital		1,460

		5,000		5,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Rajesh	Ravi	Raman	Particulars	Rajesh	Ravi	Raman
				Balance b/d	29,000	15,000
				Revaluation	2,190	1,460
Balance c/d	31,190	16,460	16,000	Cash			16,000
(before and just went of
Goodwill)
	31,190	16,460	16,000		31,190	16,460	16,000
Rajesh’s Capital			1,635	Balance c/d	31,190	16,460	16,000
Raman’s Capital			1,635	Raman’s Capital	1,635	1,635
Balance c/d	32,825	18,095	12,730
	32,825	18,095	16,000		32,825	18,095	16,000

Balance Sheet as on March 31, 2014 after Raman’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		38,500	Cash (2,000 + 16,000)		18,000
Outstanding Rent		4,000	Stock (15,000 – 750)		14,250
Capital A/cs:			Prepaid Insurance		1,500
Rajesh	32,825		Debtors	9,400
Ravi	18,095		Less: Provision for D. Debts	500	8,900
Raman	12,730	63,730	Machinery		19,000
			Building (35,000 + 5,000)		40,000
			Furniture (5,000 – 500)		4,500
		1,06,150			1,06,150

Working Notes-

WN1

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2

Calculation of Goodwill

Actual Capital of all Partners before adjustment of goodwill = Rajesh’s Capital + Ravi’s Capital + Raman’s Capital

= 31,190 + 16,460 + 16,000

= Rs 63,650

Capitalised value on the basis of Raman’s share

Raman’s share of Goodwill

WN3

Adjustment of Raman’s share of goodwill

Rajesh and Ravi each Capital Accounts will be credited by

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Raman’s Capital A/c	Dr.		3,270
To Rajesh’s Capital A/c				1,635
To Ravi’s Capital A/c				1,635
(Raman’s share of goodwill adjusted)

WN4

Distribution of Profit on Revaluation (in old ratio)

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Machinery	3,000	Building	7,000
Provision for Doubtful Debts	500
Creditors	1,500
Profit transferred to
A Capital	1,200
B Capital	800

	7,000		7,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	20,000	25,000
				Revaluation (Profit)	1,200	800
				Bank			25,000
Balance c/d	26,200	30,800	25,000	Premium for Goodwill	5,000	5,000
	26,200	30,800	25,000		26,200	30,800	25,000

Balance Sheet as on April 01, 2014 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors (15,000 + 1,500)		16,500	Building (18,000 + 7,000)		25,000
Capital A/cs:			Machinery (15,000 – 3,000)		12,000
A	26,200		Stock		12,000
B	30,800		Debtors	10,000
C	25,000	82,000	Less: Prov. for D. Debts	500	9,500
			Bank (5,000 + 35,000)		40,000
		98,500			98,500

Working Notes-

WN1

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2

Distribution on Premium for Goodwill

WN3

Distribution of Revaluation Profit (in old ratio)

Question 70:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Machinery	3,000	Building	7,000
Provision for Doubtful Debts	500
Creditors	1,500
Profit transferred to
A Capital	1,200
B Capital	800

	7,000		7,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	20,000	25,000
				Revaluation (Profit)	1,200	800
				Bank			25,000
Balance c/d	26,200	30,800	25,000	Premium for Goodwill	5,000	5,000
	26,200	30,800	25,000		26,200	30,800	25,000

Balance Sheet as on April 01, 2014 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors (15,000 + 1,500)		16,500	Building (18,000 + 7,000)		25,000
Capital A/cs:			Machinery (15,000 – 3,000)		12,000
A	26,200		Stock		12,000
B	30,800		Debtors	10,000
C	25,000	82,000	Less: Prov. for D. Debts	500	9,500
			Bank (5,000 + 35,000)		40,000
		98,500			98,500

Working Notes-

WN1

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2

Distribution on Premium for Goodwill

WN3

Distribution of Revaluation Profit (in old ratio)

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Stock (2,000 – 400)	1,600
Bank (charges)	200	Prepaid Insurance	600
Building	3,000
Creditors	800	Loss transferred to
		A Capital	3,000
		B Capital	2,000

	5,600		5,600

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Revaluation	3,000	2,000		Balance b/d	60,000	40,000
				Bank			30,000
				Premium for Goodwill	6,000	4,000
Balance c/d	63,000	42,000	30,000
	66,000	44,000	30,000		66,000	44,000	30,000

Balance Sheet as on April 01, 2013 after C’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Building (50,000 – 3,000)	47,000
A	63,000		Plant and Machinery	30,000
B	42,000		Stock (20,000 – 1,600)	18,400
C	30,000	1,35,000	Debtors	10,000
Creditors (20,000 + 800)		20,800	Bank	49,800
			Prepaid Insurance	600
		1,55,800		1,55,800

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	10,000	Revaluation (Bank charges)	200
C’s Capital	30,000
Premium for Goodwill	10,000	Balance c/d	49,800
	50,000		50,000

Working Notes:

WN1 Sacrificing Ratio

Old Ratio (A and B) 3 : 2

Sacrificing Ratio = 3 : 2

WN2 Distribution of Premium for Goodwill

Question 71:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Stock (2,000 – 400)	1,600
Bank (charges)	200	Prepaid Insurance	600
Building	3,000
Creditors	800	Loss transferred to
		A Capital	3,000
		B Capital	2,000

	5,600		5,600

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Revaluation	3,000	2,000		Balance b/d	60,000	40,000
				Bank			30,000
				Premium for Goodwill	6,000	4,000
Balance c/d	63,000	42,000	30,000
	66,000	44,000	30,000		66,000	44,000	30,000

Balance Sheet as on April 01, 2013 after C’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Building (50,000 – 3,000)	47,000
A	63,000		Plant and Machinery	30,000
B	42,000		Stock (20,000 – 1,600)	18,400
C	30,000	1,35,000	Debtors	10,000
Creditors (20,000 + 800)		20,800	Bank	49,800
			Prepaid Insurance	600
		1,55,800		1,55,800

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	10,000	Revaluation (Bank charges)	200
C’s Capital	30,000
Premium for Goodwill	10,000	Balance c/d	49,800
	50,000		50,000

Working Notes:

WN1 Sacrificing Ratio

Old Ratio (A and B) 3 : 2

Sacrificing Ratio = 3 : 2

WN2 Distribution of Premium for Goodwill

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Bad Debts	2,000	Stock	2,000
Provision for Doubtful Debts	2,000	Creditors (4,000 – 3,200)	800
(4,000 × 50%)
		Loss transferred to
		A Capital	720
		B Capital	480
	4,000		4,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Revaluation	720	480		Balance b/d	50,000	40,000
				Reserve	6,000	4,000
				Bank			25,000
Balance c/d	58,280	45,520	25,000	Premium for Goodwill	3,000	2,000
	59,000	46,000	25,000		59,000	46,000	25,000

Balance Sheet as on April 01, 2014after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Building		50,000
A	58,280		Plan and Machinery		30,000
B	45,520		Stock (18,000 × 100/90)		20,000
C	25,000	1,28,800	Debtors	22,000
Creditors (20,000 – 800)		19,200	Less: Bad Debts	2,000
Outstanding Expenses		5,000	Less: Prov. for D. Debts	2,000	18,000
			Bank (5,000 + 30,000)		35,000
		1,53,000			1,53,000

Working Notes

WN1

WN2

Distribution of Reserve

WN3

Distribution of Premium for Goodwill

Question 72:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Bad Debts	2,000	Stock	2,000
Provision for Doubtful Debts	2,000	Creditors (4,000 – 3,200)	800
(4,000 × 50%)
		Loss transferred to
		A Capital	720
		B Capital	480
	4,000		4,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Revaluation	720	480		Balance b/d	50,000	40,000
				Reserve	6,000	4,000
				Bank			25,000
Balance c/d	58,280	45,520	25,000	Premium for Goodwill	3,000	2,000
	59,000	46,000	25,000		59,000	46,000	25,000

Balance Sheet as on April 01, 2014after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Building		50,000
A	58,280		Plan and Machinery		30,000
B	45,520		Stock (18,000 × 100/90)		20,000
C	25,000	1,28,800	Debtors	22,000
Creditors (20,000 – 800)		19,200	Less: Bad Debts	2,000
Outstanding Expenses		5,000	Less: Prov. for D. Debts	2,000	18,000
			Bank (5,000 + 30,000)		35,000
		1,53,000			1,53,000

Working Notes

WN1

WN2

Distribution of Reserve

WN3

Distribution of Premium for Goodwill

Answer:

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars		Amount Rs

		Fixed Assets:
		Furniture	95,000 × 10%	9,500
Profit transferred to		Business Premises	2,05,000 × 10%	20,500
A Capital	15,000
B Capital	10,000
C Capital	5,000

	30,000			30,000

Partners’ Capital Accounts
Dr.									Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D
A’s Capital (Goodwill)			7,500		Balance b/d	1,20,000	1,20,000	1,20,000
B’s Capital (Goodwill)			2,500		Revaluation (Profit)	15,000	10,000	5,000
					Cash				1,20,000
Balance c/d	1,65,000	1,40,000	1,15,000	1,20,000	Premium for Goodwill	22,500	7,500
					C’s Capital (Goodwill)	7,500	2,500
	1,65,000	1,40,000	1,25,000	1,20,000		1,65,000	1,40,000	1,25,000	1,20,000

Balance Sheet as on April 1, 2014, after D’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Furniture (95,000 + 9,500)	1,04,500
A	1,65,000		Business Premises (2,05,000+20,500)	2,25,500
B	1,40,000		Stock-in-Trade	40,000
C	1,15,000		Debtors	28,000
D	1,20,000	5,40,000	Cash at Bank	15,000
Sundry Creditors		20,000	Cash in hand (4,200 + 1,50,000)	1,54,200
Outstanding salaries and wages		7,200
		5,67,200		5,67,200

Working Note:

WN1

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2

Calculation of C’s gain in goodwill

WN3

Amount of Goodwill to be distributed between A and B (Sacrificing Partners)

WN4

Journal Entries for D’s Capital and distribution of goodwill

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Cash A/c	Dr.		1,50,000
To D’s Capital A/c				1,20,000
To Premium for Goodwill A/c				30,000
(D brought Capital and share of Capital)

Premium for Goodwill	Dr.		30,000
C’s Capital A/c	Dr.		10,000
To A’s Capital A/c				30,000
To B’s Capital				10,000
(Gain goodwill distributed between A and B in sacrificing ratio i.e. 3:1)

Question 73:

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars		Amount Rs

		Fixed Assets:
		Furniture	95,000 × 10%	9,500
Profit transferred to		Business Premises	2,05,000 × 10%	20,500
A Capital	15,000
B Capital	10,000
C Capital	5,000

	30,000			30,000

Partners’ Capital Accounts
Dr.									Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D
A’s Capital (Goodwill)			7,500		Balance b/d	1,20,000	1,20,000	1,20,000
B’s Capital (Goodwill)			2,500		Revaluation (Profit)	15,000	10,000	5,000
					Cash				1,20,000
Balance c/d	1,65,000	1,40,000	1,15,000	1,20,000	Premium for Goodwill	22,500	7,500
					C’s Capital (Goodwill)	7,500	2,500
	1,65,000	1,40,000	1,25,000	1,20,000		1,65,000	1,40,000	1,25,000	1,20,000

Balance Sheet as on April 1, 2014, after D’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Furniture (95,000 + 9,500)	1,04,500
A	1,65,000		Business Premises (2,05,000+20,500)	2,25,500
B	1,40,000		Stock-in-Trade	40,000
C	1,15,000		Debtors	28,000
D	1,20,000	5,40,000	Cash at Bank	15,000
Sundry Creditors		20,000	Cash in hand (4,200 + 1,50,000)	1,54,200
Outstanding salaries and wages		7,200
		5,67,200		5,67,200

Working Note:

WN1

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2

Calculation of C’s gain in goodwill

WN3

Amount of Goodwill to be distributed between A and B (Sacrificing Partners)

WN4

Journal Entries for D’s Capital and distribution of goodwill

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Cash A/c	Dr.		1,50,000
To D’s Capital A/c				1,20,000
To Premium for Goodwill A/c				30,000
(D brought Capital and share of Capital)

Premium for Goodwill	Dr.		30,000
C’s Capital A/c	Dr.		10,000
To A’s Capital A/c				30,000
To B’s Capital				10,000
(Gain goodwill distributed between A and B in sacrificing ratio i.e. 3:1)

Answer:

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Revaluation A/c	Dr.		1,250
To Stock A/c				1,250
(Decrease in stock transferred to Revaluation Account)

Freehold Premises A/c	Dr.		5,000
Provision for D. Debts A/c	Dr.		1,000
To Revaluation A/c				6,000
(Increase in freehold premises and decrease in provision for doubtful debts transferred to Revaluation Account)

Revaluation A/c	Dr.		4,750
To Sushil’s Capital A/c				2,850
To Satish’s Capital A/c				1,900
(Profit on revaluation transferred to Capital A/cs in old Ratio)

Bank A/c	Dr.		10,800
To Samir’s Capital A/c				6,000
To Premium for Goodwill A/c				4,800
(Samir brought Capital and share of goodwill)

Premium for Goodwill A/c	Dr.		4,800
To Sushil’s Capital A/c				2,880
To Satish’s Capital A/c				1,920
(Premium for Goodwill distributed between Sushil and Satish in Sacrificing ratio i.e. 3:2)

Revaluation Account
Particulars	Amount Rs	Particulars	Amount Rs

Stock (12,500 × 10%)	1,250	Free hold Premises (15,000 – 10,000)	5,000
Profit transferred to		Provision for Doubtful Debts	1,000
Sushil Capital	2,850
Satish Capital	1,900
	6,000		6,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Sushil	Satish	Samir	Particulars	Sushil	Satish	Samir
				Balance b/d	25,000	9,000
				Revaluation (Profit)	2,850	1,900
				Bank			6,000
Balance c/d	30,730	12,820	6,000	Premium for Goodwill	2,880	1,920
	30,730	12,820	6,000		30,730	12,820	6,000

Balance Sheet as on March 31, 2014 after Samir’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		18,400	Freehold Premises		15,000
Capital A/cs:			Machinery		5,400
Sushil	30,730		Stock (12,500 – 1,250)		11,250
Satish	12,820		Debtors	22,500
Samir	6,000	49,550	Less: Provision for Doubtful Debts	3,000	19,500
			Cash at Bank (6,000 + 10,800)		16,800
		67,950			67,950

Working Notes:

WN1: Sacrificing Ratio

WN2: Distribution for Premium for Goodwill (in sacrificing ratio)

WN3: Distribution Revaluation Profit (in old ratio)

Question 74:

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Revaluation A/c	Dr.		1,250
To Stock A/c				1,250
(Decrease in stock transferred to Revaluation Account)

Freehold Premises A/c	Dr.		5,000
Provision for D. Debts A/c	Dr.		1,000
To Revaluation A/c				6,000
(Increase in freehold premises and decrease in provision for doubtful debts transferred to Revaluation Account)

Revaluation A/c	Dr.		4,750
To Sushil’s Capital A/c				2,850
To Satish’s Capital A/c				1,900
(Profit on revaluation transferred to Capital A/cs in old Ratio)

Bank A/c	Dr.		10,800
To Samir’s Capital A/c				6,000
To Premium for Goodwill A/c				4,800
(Samir brought Capital and share of goodwill)

Premium for Goodwill A/c	Dr.		4,800
To Sushil’s Capital A/c				2,880
To Satish’s Capital A/c				1,920
(Premium for Goodwill distributed between Sushil and Satish in Sacrificing ratio i.e. 3:2)

Revaluation Account
Particulars	Amount Rs	Particulars	Amount Rs

Stock (12,500 × 10%)	1,250	Free hold Premises (15,000 – 10,000)	5,000
Profit transferred to		Provision for Doubtful Debts	1,000
Sushil Capital	2,850
Satish Capital	1,900
	6,000		6,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Sushil	Satish	Samir	Particulars	Sushil	Satish	Samir
				Balance b/d	25,000	9,000
				Revaluation (Profit)	2,850	1,900
				Bank			6,000
Balance c/d	30,730	12,820	6,000	Premium for Goodwill	2,880	1,920
	30,730	12,820	6,000		30,730	12,820	6,000

Balance Sheet as on March 31, 2014 after Samir’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		18,400	Freehold Premises		15,000
Capital A/cs:			Machinery		5,400
Sushil	30,730		Stock (12,500 – 1,250)		11,250
Satish	12,820		Debtors	22,500
Samir	6,000	49,550	Less: Provision for Doubtful Debts	3,000	19,500
			Cash at Bank (6,000 + 10,800)		16,800
		67,950			67,950

Working Notes:

WN1: Sacrificing Ratio

WN2: Distribution for Premium for Goodwill (in sacrificing ratio)

WN3: Distribution Revaluation Profit (in old ratio)

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Investment (5,000 – 4,500)	500	Loss transferred to
		A Capital	375
		B Capital	125
	500		500

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Goodwill	750	250		Balance b/d	9,000	3,000
Revaluation (Loss)	375	125		Workmen’s Compensation Fund	750	250
				Bank			8,000
Balance c/d	10,125	3,375	8,000	Premium for Goodwill	1,500	500
	11,250	3,750	8,000		11,250	3,750	8,000

Balance Sheet as on March 31, 2014 after C’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Bank (1,000 + 10,000)	11,000
A	10,125		Debtors	6,000
B	3,375		Stock	3,000
C	8,000	21,500	Investments (5,000 – 500)	4,500
Creditors		2,000
Workmen’s Compensation Claim		1,000
		24,500		24,500

Working Notes:

WN1

WN2

Goodwill written-off

WN3

Distribution of Premium for Goodwill

WN4

Distribution of Revaluation Loss

WN5

Treatment of Workmen’s Compensation Reserve

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Workmen’s Compensation Fund A/c	Dr.		2,000
To Workmen’s Compensation Claim A/c				1,000
To A’s Capital A/c				750
To B’s Capital A/c				250
(Workmen Compensation Fund utilised)

Question 75:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Investment (5,000 – 4,500)	500	Loss transferred to
		A Capital	375
		B Capital	125
	500		500

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Goodwill	750	250		Balance b/d	9,000	3,000
Revaluation (Loss)	375	125		Workmen’s Compensation Fund	750	250
				Bank			8,000
Balance c/d	10,125	3,375	8,000	Premium for Goodwill	1,500	500
	11,250	3,750	8,000		11,250	3,750	8,000

Balance Sheet as on March 31, 2014 after C’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Bank (1,000 + 10,000)	11,000
A	10,125		Debtors	6,000
B	3,375		Stock	3,000
C	8,000	21,500	Investments (5,000 – 500)	4,500
Creditors		2,000
Workmen’s Compensation Claim		1,000
		24,500		24,500

Working Notes:

WN1

WN2

Goodwill written-off

WN3

Distribution of Premium for Goodwill

WN4

Distribution of Revaluation Loss

WN5

Treatment of Workmen’s Compensation Reserve

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Workmen’s Compensation Fund A/c	Dr.		2,000
To Workmen’s Compensation Claim A/c				1,000
To A’s Capital A/c				750
To B’s Capital A/c				250
(Workmen Compensation Fund utilised)

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Bad Debts	3,000	A's Capital A/c	300
Provision for Doubtful Debts	1,200	Loss transferred to
Investment (5,000 â€“ 4,900)	100	A Capital	2,400
		B Capital	1,600
	4,300		4,300

Partnersâ€™ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Revaluation	2,400	1,600		Balance b/d	50,000	30,000
Revaluation	300			Bank			20,000
				Premium for Goodwill	3,000	2,000
Balance c/d	50,300	30,400	20,000
	53,000	32,000	20,000		53,000	32,000	20,000

Balance Sheet as on April 01, 2015 after Câ€™s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Buildings		35,000
A	50,300		Machinery		25,000
B	30,400		Stock		15,000
C	20,000	1,00,700	Debtors	15,000
Creditors		20,000	Less: Bad Debts	3,000
				12,000
			Less: 10% Provision for Doubtful Debts	1,200	10,800
			Bank		34,900
		1,20,700			1,20,700

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	5,000
Câ€™s Capital	20,000
Premium for Goodwill	5,000
Investments	4,900	Balance c/d	34,900

	34,900		34,900

Working Notes:

WN1

WN2

Distribution of Premium for Goodwill

WN3

Sale of Investments

Bank A/c	Dr.	4,900
Revaluation A/c	Dr.	100
To Investment			5,000

WN4

Bad debt Recovered

A's Capital A/c	Dr.	300
To Revaluation A/c			300

Note: A's Capital Balance and Total of Balance Sheet as per above solution is Rs 50,300 and Rs 1,20,700 respectively. However, as per the book A's Capital Balance and Total of Balance Sheet should be Rs 50,600 and Rs 1,21,000 respectively.

Question 76:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Bad Debts	3,000	A's Capital A/c	300
Provision for Doubtful Debts	1,200	Loss transferred to
Investment (5,000 â€“ 4,900)	100	A Capital	2,400
		B Capital	1,600
	4,300		4,300

Partnersâ€™ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Revaluation	2,400	1,600		Balance b/d	50,000	30,000
Revaluation	300			Bank			20,000
				Premium for Goodwill	3,000	2,000
Balance c/d	50,300	30,400	20,000
	53,000	32,000	20,000		53,000	32,000	20,000

Balance Sheet as on April 01, 2015 after Câ€™s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Buildings		35,000
A	50,300		Machinery		25,000
B	30,400		Stock		15,000
C	20,000	1,00,700	Debtors	15,000
Creditors		20,000	Less: Bad Debts	3,000
				12,000
			Less: 10% Provision for Doubtful Debts	1,200	10,800
			Bank		34,900
		1,20,700			1,20,700

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	5,000
Câ€™s Capital	20,000
Premium for Goodwill	5,000
Investments	4,900	Balance c/d	34,900

	34,900		34,900

Working Notes:

WN1

WN2

Distribution of Premium for Goodwill

WN3

Sale of Investments

Bank A/c	Dr.	4,900
Revaluation A/c	Dr.	100
To Investment			5,000

WN4

Bad debt Recovered

A's Capital A/c	Dr.	300
To Revaluation A/c			300

Note: A's Capital Balance and Total of Balance Sheet as per above solution is Rs 50,300 and Rs 1,20,700 respectively. However, as per the book A's Capital Balance and Total of Balance Sheet should be Rs 50,600 and Rs 1,21,000 respectively.

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Stock	10,000	Land and Building	25,000
Furniture	500	(1, 25,000 × 20%)
Provision for D. Debts	4,000
Profit transferred to
X Capital	7,875
Y Capital	2,625
	25,000		25,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
X’s Capital			15,000	Balance b/d	1,50,000	80,000
Y’s Capital			5,000	Workmen’s Compensation Fund	15,000	5,000
				Revaluation (Profit)	7,875	2,625
Balance c/d	1,87,875	92,625	30,000	Cash			50,000
				Z’s Capital	15,000	5,000
	1,87,875	92,625	50,000		1,87,875	92,625	50,000

Balance Sheet as on April 01, 2014 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Land and Building (1,25,000 + 25,000)		1,50,000
X	1,87,875
Y	92,625		Office Furniture (5,000 – 500)		4,500
Z	30,000	3,10,500	Stock (1,00,000 – 10,000)		90,000
Sundry Creditors		1,50,000	Sundry Debtors	80,000
Bills Payable		37,500	Less: 5% Provision for D. Debts	4,000	76,000
			Cash at Bank		1,00,000
			Cash in Hand (12,500 + 50,000)		62,500
			Bills Receivable		15,000
		4,98,000			4,98,000

Working Notes:

WN1: Sacrificing Ratio

WN2: Calculation of Partners' Share of Goodwill

Goodwill of the firm = 1, 00,000

	Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Z’s Capital A/c	Dr.		20,000
	To X’s Capital A/c				15,000
	To Y’s Capital A/c				5,000
	(Z’s share of goodwill changed from his Capital Account)

	Workmen’s Compensation Fund A/c			20,000
	To X’s Capital A/c				15,000
	To Y’s Capital				5,000
	(Workmen’s Compensation Fund distributed)

Question 77:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Stock	10,000	Land and Building	25,000
Furniture	500	(1, 25,000 × 20%)
Provision for D. Debts	4,000
Profit transferred to
X Capital	7,875
Y Capital	2,625
	25,000		25,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
X’s Capital			15,000	Balance b/d	1,50,000	80,000
Y’s Capital			5,000	Workmen’s Compensation Fund	15,000	5,000
				Revaluation (Profit)	7,875	2,625
Balance c/d	1,87,875	92,625	30,000	Cash			50,000
				Z’s Capital	15,000	5,000
	1,87,875	92,625	50,000		1,87,875	92,625	50,000

Balance Sheet as on April 01, 2014 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Land and Building (1,25,000 + 25,000)		1,50,000
X	1,87,875
Y	92,625		Office Furniture (5,000 – 500)		4,500
Z	30,000	3,10,500	Stock (1,00,000 – 10,000)		90,000
Sundry Creditors		1,50,000	Sundry Debtors	80,000
Bills Payable		37,500	Less: 5% Provision for D. Debts	4,000	76,000
			Cash at Bank		1,00,000
			Cash in Hand (12,500 + 50,000)		62,500
			Bills Receivable		15,000
		4,98,000			4,98,000

Working Notes:

WN1: Sacrificing Ratio

WN2: Calculation of Partners' Share of Goodwill

Goodwill of the firm = 1, 00,000

	Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Z’s Capital A/c	Dr.		20,000
	To X’s Capital A/c				15,000
	To Y’s Capital A/c				5,000
	(Z’s share of goodwill changed from his Capital Account)

	Workmen’s Compensation Fund A/c			20,000
	To X’s Capital A/c				15,000
	To Y’s Capital				5,000
	(Workmen’s Compensation Fund distributed)

Answer:

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Reserve for D. Debts	4,000		Plant and Machinery	12,000
Less: Old Reserve	800	3,200	(60,000 – 48,000)

Furniture	10,000 × 10%	1,000	Stock (40,000 – 32,000)	8,000
Outstanding salary		8,000
Profit transferred to			Land and Building	10,000
Deepika Capital		10,680	(50,000 × 20%)
Rajshree Capital		7,120
		30,000		30,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Deepika	Rajshree	Anshu	Particulars	Deepika	Rajshree	Anshu
Balance c/d	58,680	47,120	32,000	Balance b/d	48,000	40,000
(before adjustment of Goodwill)
				Revaluation	10,680	7,120
				Cash			32,000
	58,680	47,120	32,000		58,680	47,120	32,000

Deepika			2,220	Balance b/d	58,680	47,120	32,000
Rajshree			2,220	Anshu’s Capital (Goodwill)	2,220	2,220
Balance c/d	60,900	49,340	27,560
	60,900	49,340	32,000		60,900	49,340	32,000

Balance Sheet as on March 31, 2014 after Anshu’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Outstanding Salaries		8,000	Cash in Hand		1,200
Sundry Creditors		16,000	Cash at Bank		28,800
Public Deposits		61,000	Stock		40,000
Outstanding Liabilities		2,000	Prepaid Insurance		1,000
Capital A/cs:			Sundry Debtors	28,800
Deepika	60,900		Less: reserve for D. Debts	4,000	24,800
Rajshree	49,340		Plant and Machinery		60,000
Anshu	27,560	1,37,800	Land and Building		60,000
			Furniture		9,000
		2,24,800			2,24,800

Working Notes

WN1: Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2: Valuation of Goodwill

Capitalised value on the basis of Anshu’s share

Actual Capital of all partners before adjustment of Goodwill = 58,680 + 47,120 + 32,000

= Rs 1,37,800

Goodwill = Capitalised value − Actual Capital of all partners before adjustment of Goodwill

= 1,60,000 − 1,37,800

= Rs 22,200

Anshu’s share of Goodwill

Deepika and Rajshree each will entitle for Goodwill

Question 78:

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Reserve for D. Debts	4,000		Plant and Machinery	12,000
Less: Old Reserve	800	3,200	(60,000 – 48,000)

Furniture	10,000 × 10%	1,000	Stock (40,000 – 32,000)	8,000
Outstanding salary		8,000
Profit transferred to			Land and Building	10,000
Deepika Capital		10,680	(50,000 × 20%)
Rajshree Capital		7,120
		30,000		30,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Deepika	Rajshree	Anshu	Particulars	Deepika	Rajshree	Anshu
Balance c/d	58,680	47,120	32,000	Balance b/d	48,000	40,000
(before adjustment of Goodwill)
				Revaluation	10,680	7,120
				Cash			32,000
	58,680	47,120	32,000		58,680	47,120	32,000

Deepika			2,220	Balance b/d	58,680	47,120	32,000
Rajshree			2,220	Anshu’s Capital (Goodwill)	2,220	2,220
Balance c/d	60,900	49,340	27,560
	60,900	49,340	32,000		60,900	49,340	32,000

Balance Sheet as on March 31, 2014 after Anshu’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Outstanding Salaries		8,000	Cash in Hand		1,200
Sundry Creditors		16,000	Cash at Bank		28,800
Public Deposits		61,000	Stock		40,000
Outstanding Liabilities		2,000	Prepaid Insurance		1,000
Capital A/cs:			Sundry Debtors	28,800
Deepika	60,900		Less: reserve for D. Debts	4,000	24,800
Rajshree	49,340		Plant and Machinery		60,000
Anshu	27,560	1,37,800	Land and Building		60,000
			Furniture		9,000
		2,24,800			2,24,800

Working Notes

WN1: Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2: Valuation of Goodwill

Capitalised value on the basis of Anshu’s share

Actual Capital of all partners before adjustment of Goodwill = 58,680 + 47,120 + 32,000

= Rs 1,37,800

Goodwill = Capitalised value − Actual Capital of all partners before adjustment of Goodwill

= 1,60,000 − 1,37,800

= Rs 22,200

Anshu’s share of Goodwill

Deepika and Rajshree each will entitle for Goodwill

Answer:

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

General Reserve A/c	Dr.		5,000
To X’s Capital A/c				3,000
To Y’s Capital A/c				2,000
(General Reserve distributed)

X’s Capital A/c	Dr.		3,000
Y’s Capital A/c	Dr.		2,000
To Goodwill A/c				5,000
(Goodwill written-off)

Revaluation A/c	Dr.		3,010
To Stock A/c				770
To Plant and Machinery A/c				1,800
To Provision for Depreciation A/c				440
(Decrease in stock and creation of Provision for Doubtful Debts)

Investment A/c	Dr.		9,000
Provision for Distribution on Creditors A/c	Dr.		310
To Revaluation A/c				9,310
(Increase in Investment and Provision Discount on Creditors made)

Revaluation A/c	Dr.		6,300
To X’s Capital A/c				3,780
To Y’s Capital A/c				2,520
(Revaluation profit distributed between X and Y in old Ratio)

Cash A/c	Dr.		22,000
To Z’s Capital A/c				15,000
To Premium for Goodwill				7,000
(Z brought capital and half of his share of goodwill)

Premium for Goodwill A/c	Dr.		7,000
To X’s Capital A/c				4,000
To Y’s Capital A/c				3,000
(Premium for Goodwill distributed)

Z’s Capital A/c	Dr.		7,000
To X’s Capital A/c				4,000
To Y’s Capital A/c				3,000
(Half of Z share of Goodwill which was not brought by Z in cash charged from his capital account)

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Stock (7,700 × 10%)	770	Investment	9,000
Plant and Machinery (18,000 × 10%)	1,800	Provision for Disc on Creditors	310
Provision for D. Debts	440
Profit transferred to
X Capital	3,780
Y Capital	2,520
	9,310		9,310

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Goodwill	3,000	2,000		Balance b/d	16,800	13,200
X’s Capital			3,000	General Reserve	3,000	2,000
Y’s Capital			4,000	Cash			15,000
				Premium for Goodwill	3,000	4,000
Balance c/d	26,580	23,720	8,000	Z’s Capital	3,000	4,000
				Revaluation	3,780	2,520
	29,580	25,720	15,000		29,580	25,720	15,000

Balance Sheet as on March 31, 2012 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors	6,200		Cash		24,000
Less: Provision for D. Creditors	310	5,890	Stock (7,700 – 770)		6,930
Bills Payable		3,300	Debtors	8,800
Capital A/cs:			Less: 5% Provision for D. Debts	440	8,360
X	26,580		Plant and Machinery (18,000 – 1,800)		16,200
Y	23,720		Investments (3,000 + 9,000)		12,000
Z	8,000	58,300
		67,490			67,490

Calculation of Profit sharing Ratio

Working Notes

WN1: Distribution of General Reserve

WN2: Writing-off of Goodwill

WN3: Distribution of Z's Share of Goodwill

Question 79:

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

General Reserve A/c	Dr.		5,000
To X’s Capital A/c				3,000
To Y’s Capital A/c				2,000
(General Reserve distributed)

X’s Capital A/c	Dr.		3,000
Y’s Capital A/c	Dr.		2,000
To Goodwill A/c				5,000
(Goodwill written-off)

Revaluation A/c	Dr.		3,010
To Stock A/c				770
To Plant and Machinery A/c				1,800
To Provision for Depreciation A/c				440
(Decrease in stock and creation of Provision for Doubtful Debts)

Investment A/c	Dr.		9,000
Provision for Distribution on Creditors A/c	Dr.		310
To Revaluation A/c				9,310
(Increase in Investment and Provision Discount on Creditors made)

Revaluation A/c	Dr.		6,300
To X’s Capital A/c				3,780
To Y’s Capital A/c				2,520
(Revaluation profit distributed between X and Y in old Ratio)

Cash A/c	Dr.		22,000
To Z’s Capital A/c				15,000
To Premium for Goodwill				7,000
(Z brought capital and half of his share of goodwill)

Premium for Goodwill A/c	Dr.		7,000
To X’s Capital A/c				4,000
To Y’s Capital A/c				3,000
(Premium for Goodwill distributed)

Z’s Capital A/c	Dr.		7,000
To X’s Capital A/c				4,000
To Y’s Capital A/c				3,000
(Half of Z share of Goodwill which was not brought by Z in cash charged from his capital account)

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Stock (7,700 × 10%)	770	Investment	9,000
Plant and Machinery (18,000 × 10%)	1,800	Provision for Disc on Creditors	310
Provision for D. Debts	440
Profit transferred to
X Capital	3,780
Y Capital	2,520
	9,310		9,310

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Goodwill	3,000	2,000		Balance b/d	16,800	13,200
X’s Capital			3,000	General Reserve	3,000	2,000
Y’s Capital			4,000	Cash			15,000
				Premium for Goodwill	3,000	4,000
Balance c/d	26,580	23,720	8,000	Z’s Capital	3,000	4,000
				Revaluation	3,780	2,520
	29,580	25,720	15,000		29,580	25,720	15,000

Balance Sheet as on March 31, 2012 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors	6,200		Cash		24,000
Less: Provision for D. Creditors	310	5,890	Stock (7,700 – 770)		6,930
Bills Payable		3,300	Debtors	8,800
Capital A/cs:			Less: 5% Provision for D. Debts	440	8,360
X	26,580		Plant and Machinery (18,000 – 1,800)		16,200
Y	23,720		Investments (3,000 + 9,000)		12,000
Z	8,000	58,300
		67,490			67,490

Calculation of Profit sharing Ratio

Working Notes

WN1: Distribution of General Reserve

WN2: Writing-off of Goodwill

WN3: Distribution of Z's Share of Goodwill

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Furniture	30,000	Land and Building	60,000
Stock	40,000	Creditors	3,000
Sundry Debtors	5,000	Loss on transferred to
		X Capital	6,000
		Y Capital	4,000
		Z Capital	2,000
	75,000		75,000

Partners’ Capital Accounts
Dr.									Cr.
Particulars	X	Y	Z	W	Particulars	X	Y	Z	W
Revaluation (Loss)	6,000	4,000	2,000		Balance b/d	3,00,000	2,00,000	1,00,000
Bank (Goodwill)	30,000	20,000	10,000		General Reserve	1,50,000	1,00,000	50,000
Bank (General Reserve)	75,000	50,000	25,000		Bank				1,50,000
					Premium for Goodwill	60,000	40,000	20,000
Balance c/d	3,99,000	2,66,000	1,33,000	1,50,000
	5,10,000	3,40,000	1,70,000	1,50,000		5,10,000	3,40,000	1,70,000	1,50,000

Balance Sheet as on April 01, 2012 after W’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Land and Building (5,00,000 + 60,000)	5,60,000
X	3,99,000		Furniture (1,50,000 – 30,000)	1,20,000
Y	2,66,000		Stock (2,00,000 – 40,000)	1,60,000
Z	1,33,000		Bills Receivable	50,000
W	1,50,000	9,48,000	Sundry Debtors (75,000 – 5,000)	70,000
Sundry Creditors (60,000 – 23,000)		37,000	Cash at Bank	65,000
Bills Payable		40,000
		10,25,000		10,25,000

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	25,000	Creditors	20,000
W’s Capital	1,50,000	X’s Capital	1,05,000
Premium for Goodwill	1,20,000	Y’s Capital	70,000
		Z’s Capital	35,000
		Balance c/d	65,000
	2,95,000		2,95,000

Working Notes:

WN1

WN2

Distribution of General Reserve

WN3

Distribution of Premium for Goodwill

Question 80:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Furniture	30,000	Land and Building	60,000
Stock	40,000	Creditors	3,000
Sundry Debtors	5,000	Loss on transferred to
		X Capital	6,000
		Y Capital	4,000
		Z Capital	2,000
	75,000		75,000

Partners’ Capital Accounts
Dr.									Cr.
Particulars	X	Y	Z	W	Particulars	X	Y	Z	W
Revaluation (Loss)	6,000	4,000	2,000		Balance b/d	3,00,000	2,00,000	1,00,000
Bank (Goodwill)	30,000	20,000	10,000		General Reserve	1,50,000	1,00,000	50,000
Bank (General Reserve)	75,000	50,000	25,000		Bank				1,50,000
					Premium for Goodwill	60,000	40,000	20,000
Balance c/d	3,99,000	2,66,000	1,33,000	1,50,000
	5,10,000	3,40,000	1,70,000	1,50,000		5,10,000	3,40,000	1,70,000	1,50,000

Balance Sheet as on April 01, 2012 after W’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Land and Building (5,00,000 + 60,000)	5,60,000
X	3,99,000		Furniture (1,50,000 – 30,000)	1,20,000
Y	2,66,000		Stock (2,00,000 – 40,000)	1,60,000
Z	1,33,000		Bills Receivable	50,000
W	1,50,000	9,48,000	Sundry Debtors (75,000 – 5,000)	70,000
Sundry Creditors (60,000 – 23,000)		37,000	Cash at Bank	65,000
Bills Payable		40,000
		10,25,000		10,25,000

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	25,000	Creditors	20,000
W’s Capital	1,50,000	X’s Capital	1,05,000
Premium for Goodwill	1,20,000	Y’s Capital	70,000
		Z’s Capital	35,000
		Balance c/d	65,000
	2,95,000		2,95,000

Working Notes:

WN1

WN2

Distribution of General Reserve

WN3

Distribution of Premium for Goodwill

Answer:

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Patents	10,000	Provision for D. Debts	5,000
		Less: New Provision	(2,200)	2,800
		Loss transferred to
		X Capital		4,500
		Y Capital		2,700
	10,000			10,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
X’s Capital (General Reserve)		2,750	2,000	Balance b/d	40,000	50,000
				Y’s Capital (General Reserve)	2,750
X’s Capital (Goodwill)		4,950	3,600	Z’s Capital (General Reserve)	2,000
				Cash			25,000
Revaluation	4,500	2,700		Y’s Capital (Goodwill)	4,950
				Z’s Capital (Goodwill)	3,600
Balance c/d	48,800	39,600	19,400
	53,300	50,000	25,000		53,300	50,000	25,000

Balance Sheet as on April 01, 2012 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Capital A/cs:			Furniture		40,000
X	48,800		Sundry Debtors	44,000
Y	39,600		Less: 5% Provision for D. Debts	2,200	41,800
Z	19,400	1,07,800	Stock		20,000
General Reserve		14,000	Cash at Bank		22,000
Sundry Creditors		30,000	Cash in Hand (3,000 + 25,000)		28,000
		1,51,800			1,51,800

Working Notes

WN1

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Z’s Capital A/c	Dr.		3,600
	Y’s Capital A/c	Dr.		4,950
	To X’s Capital A/c				8,550
	(Adjustment of goodwill made)

WN3

Adjustment for General Reserve

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Y’s Capital A/c	Dr.		2,750
	Z’s Capital A/c	Dr.		2,000
	To X’s Capital				4,750
	(General and Reserve adjusted among partners in sacrificing and gaining ratio)

Question 81:

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Patents	10,000	Provision for D. Debts	5,000
		Less: New Provision	(2,200)	2,800
		Loss transferred to
		X Capital		4,500
		Y Capital		2,700
	10,000			10,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
X’s Capital (General Reserve)		2,750	2,000	Balance b/d	40,000	50,000
				Y’s Capital (General Reserve)	2,750
X’s Capital (Goodwill)		4,950	3,600	Z’s Capital (General Reserve)	2,000
				Cash			25,000
Revaluation	4,500	2,700		Y’s Capital (Goodwill)	4,950
				Z’s Capital (Goodwill)	3,600
Balance c/d	48,800	39,600	19,400
	53,300	50,000	25,000		53,300	50,000	25,000

Balance Sheet as on April 01, 2012 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Capital A/cs:			Furniture		40,000
X	48,800		Sundry Debtors	44,000
Y	39,600		Less: 5% Provision for D. Debts	2,200	41,800
Z	19,400	1,07,800	Stock		20,000
General Reserve		14,000	Cash at Bank		22,000
Sundry Creditors		30,000	Cash in Hand (3,000 + 25,000)		28,000
		1,51,800			1,51,800

Working Notes

WN1

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Z’s Capital A/c	Dr.		3,600
	Y’s Capital A/c	Dr.		4,950
	To X’s Capital A/c				8,550
	(Adjustment of goodwill made)

WN3

Adjustment for General Reserve

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Y’s Capital A/c	Dr.		2,750
	Z’s Capital A/c	Dr.		2,000
	To X’s Capital				4,750
	(General and Reserve adjusted among partners in sacrificing and gaining ratio)

Answer:

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Provision for Doubtful Debts (20,000 × 4%)	800		Land (1, 00,000 × 10%)	10,000
Less: Old Provision	500	300
Stock (30,000 × 5%)		1,500
Profit transferred to
V Capital		5,740
N Capital		2,460
		10,000		10,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	V	N	P	Particulars	V	N	P
				Balance b/d	1,50,000	50,000
				Revaluation	5,740	2,460
				General Reserve	7,000	3,000
				P’s Loan			80,000
Balance c/d	1,90,740	67,460	80,000	Premium for Goodwill	28,000	12,000
	1,90,740	67,460	80,000		1,90,740	67,460	80,000

Balance Sheet as on April 01, 2014 after P’s admission
Liabilities		Amount Rs	Assets	Amount Rs
Creditors		10,000	Cash (15,500 + 40,000)	55,500
Bills Payable		15,000	Debtors	20,000
Capital A/cs:			Bills Receivables	50,000
V	1,90,740		Stock (30,000 – 1,500)	28,500
N	67,460		Building	1,00,000
P	80,000	3,38,200	Land (1,00,000 + 10,000)	1,10,000
Provision for Doubtful Debts		800
		3,64,000		3,64,000

Working Notes

WN1

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	15,500
Premium for Goodwill	40,000
		Balance c/d	55,500
	55,500		55,500

WN2

Distribution of Premium for Goodwill

Question 82:

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Provision for Doubtful Debts (20,000 × 4%)	800		Land (1, 00,000 × 10%)	10,000
Less: Old Provision	500	300
Stock (30,000 × 5%)		1,500
Profit transferred to
V Capital		5,740
N Capital		2,460
		10,000		10,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	V	N	P	Particulars	V	N	P
				Balance b/d	1,50,000	50,000
				Revaluation	5,740	2,460
				General Reserve	7,000	3,000
				P’s Loan			80,000
Balance c/d	1,90,740	67,460	80,000	Premium for Goodwill	28,000	12,000
	1,90,740	67,460	80,000		1,90,740	67,460	80,000

Balance Sheet as on April 01, 2014 after P’s admission
Liabilities		Amount Rs	Assets	Amount Rs
Creditors		10,000	Cash (15,500 + 40,000)	55,500
Bills Payable		15,000	Debtors	20,000
Capital A/cs:			Bills Receivables	50,000
V	1,90,740		Stock (30,000 – 1,500)	28,500
N	67,460		Building	1,00,000
P	80,000	3,38,200	Land (1,00,000 + 10,000)	1,10,000
Provision for Doubtful Debts		800
		3,64,000		3,64,000

Working Notes

WN1

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	15,500
Premium for Goodwill	40,000
		Balance c/d	55,500
	55,500		55,500

WN2

Distribution of Premium for Goodwill

Answer:

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Furniture		1,000	Land and Building	5,000
Provision for D. Debts		300
Outstanding Expenses		200
Profit transferred to
Amrit’s Capital	2,100
Baldev Capital	1,400	3,500
		5,000		5,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Amrit	Baldev	Chetan	Particulars	Amrit	Baldev	Chetan
				Balance b/d	50,000	25,000
				Revaluation	2,100	1,400
				Bank			20,000
Balance c/d	55,100	29,400	20,000	Premium for Goodwill	3,000	3,000
	55,100	29,400	20,000		55,100	29,400	20,000
Cash	5,100			Balance c/d	55,100	29,400	20,000
Balance c/d (adjusted)	50,000	30,000	20,000	Cash		600
	55,100	30,000	20,000		55,100	30,000	20,000

Balance Sheet as on April 01, 2012 after Chetan’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Capital			Land and Building (25,000 + 5,000)
Amrit	50,000				30,000
Baldev	30,000		Furniture (10,000 – 1,000)		9,000
Chetan	20,000	1,00,000	Stock		46,000
Creditors		16,000	Debtors	20,000
Bills Payable		14,000	Less: Provision for D. Debts	900	19,100
Outstanding Expenses		200	Cash at Bank		26,100
		1,30,200			1,30,200

Cash Book
Dr.					Cr.
Date	Particulars	Bank Rs	Date	Particulars	Bank Rs
2012			2012
April 01	Balance b/d	4,600	April 01	Amrit’s Capital	5,100
	Chetan’s Capital	20,000
	Premium for Goodwill	6,000
	Baldev Capital	600	April 01	Balance c/d	26,100
		31,200			31,200

Working Notes:

WN1

Calculation of Sacrificing Ratio

WN2

Distribution of Premium for Goodwill

WN3

Total Capital of the firm after Chetan’s admission

Proportionate Capital:

Question 83:

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Furniture		1,000	Land and Building	5,000
Provision for D. Debts		300
Outstanding Expenses		200
Profit transferred to
Amrit’s Capital	2,100
Baldev Capital	1,400	3,500
		5,000		5,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Amrit	Baldev	Chetan	Particulars	Amrit	Baldev	Chetan
				Balance b/d	50,000	25,000
				Revaluation	2,100	1,400
				Bank			20,000
Balance c/d	55,100	29,400	20,000	Premium for Goodwill	3,000	3,000
	55,100	29,400	20,000		55,100	29,400	20,000
Cash	5,100			Balance c/d	55,100	29,400	20,000
Balance c/d (adjusted)	50,000	30,000	20,000	Cash		600
	55,100	30,000	20,000		55,100	30,000	20,000

Balance Sheet as on April 01, 2012 after Chetan’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Capital			Land and Building (25,000 + 5,000)
Amrit	50,000				30,000
Baldev	30,000		Furniture (10,000 – 1,000)		9,000
Chetan	20,000	1,00,000	Stock		46,000
Creditors		16,000	Debtors	20,000
Bills Payable		14,000	Less: Provision for D. Debts	900	19,100
Outstanding Expenses		200	Cash at Bank		26,100
		1,30,200			1,30,200

Cash Book
Dr.					Cr.
Date	Particulars	Bank Rs	Date	Particulars	Bank Rs
2012			2012
April 01	Balance b/d	4,600	April 01	Amrit’s Capital	5,100
	Chetan’s Capital	20,000
	Premium for Goodwill	6,000
	Baldev Capital	600	April 01	Balance c/d	26,100
		31,200			31,200

Working Notes:

WN1

Calculation of Sacrificing Ratio

WN2

Distribution of Premium for Goodwill

WN3

Total Capital of the firm after Chetan’s admission

Proportionate Capital:

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Revaluation A/c	Dr.		14,700
	To Typewriter A/c				1,000
	To Fixed Assets A/c				13,700
	(Decrease in value of typewriter and fixed assets transferred to Revaluation Account)

	Stationery A/c	Dr.		1,000
	Investment A/c	Dr.		2,000
	To Revaluation A/c				3,000
	(Increase in stationery and investment transferred to Revaluation Account)

	X’s Capital A/c	Dr.		7,800
	Y’s Capital A/c	Dr.		3,900
	To Revaluation A/c				11,700
	(Revaluation loss transferred to X and Y’s Capital Account in their old ratio)

	Reserve Fund A/c	Dr.		18,000
	To X’s Capital A/c				12,000
	To Y’s Capital A/c				6,000
	(Reserve Fund distributed)

	Cash A/c	Dr.		55,000
	To Z’s Capital A/c				40,000
	To Premium for Goodwill A/c				15,000
	(Z brought capital and share of goodwill)

	Premium for Goodwill A/c	Dr.		15,000
	To X’s Capital A/c				10,000
	To Y’s Capital A/c				5,000
	(Premium for Goodwill distributed between X and Y in their sacrificing ratio i.e 2:1)

	X’s Capital A/c	Dr.		5,000
	Y’s Capital A/c	Dr.		2,500
	To Cash				7,500
	(Half of the Premium for Goodwill withdrawn by X and Y)

	X’s Capital A/c	Dr.		10,000
	To Investments A/c				10,000
	(X took over the Investment)

	Cash A/c	Dr.		4,800
	To X’s Capital A/c				4,800
	(X’ brought cash to make up deficiency in capital)

	Y’s Capital A/c	Dr.		26,600
	To Cash A/c				26,600
	(Y withdrew excess capital after all adjustments)

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	5,000	X’s Capital (Goodwill)	5,000
Z’s Capital	40,000	Y’s Capital (Goodwill)	2,500
Premium for Goodwill	15,000	Y’s Capital	26,600
X’s Capital	5,800	Balance c/d	31,700
	65,800		65,800

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Typewriter (5,000 × 20%)	1,000	Investment	2,000
Fixed Assets (1,37,000 × 10%)	13,700	Stationery	1,000
		Loss transferred to
		X Capital	7,800
		Y Capital	3,900
	14,700		14,700

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation	7,800	3,900		Balance b/d	75,000	62,000
Investment	10,000			Reserve Fund	12,000	6,000
Cash (withdraw of goodwill)	5,000	2,500		Cash			40,000
Balance c/d	74,200	66,600	40,000	Premium for Goodwill	10,000	5,000
	97,000	73,000	40,000		97,000	73,000	40,000
Cash		26,600		Balance b/d	74,200	66,600	40,000
Balance c/d adjusted	80,000	40,000	40,000	Cash	5,800
	80,000	66,600	40,000		80,000	66,600	40,000

Balance Sheet as on March 31, 2012 after Z’s admission
Liabilities		Amount Rs	Assets	Amount Rs
Sundry Creditors		25,000	Cash	31,700
Capital A/cs:			Sundry Debtors	15,000
X	80,000		Stock	10,000
Y	40,000		Typewriter (5,000 – 1,000)	4,000
Z	40,000	1,60,000	Fixed Assets (1,37,000 – 13,700)	1,23,300
			Stationery	1,000

		1,85,000		1,85,000

Working Notes:

WN1: Sacrificing Ratio

WN2: Distribution of Revaluation Loss

WN3: Distribution of Premium for Goodwill

WN4: Adjustment of Capital

Total Capital of the firm on the basis of Z’s share

Total Capital of the firm	=	1,60,000
Less: Z’s Capital	=	40,000
Combined Capital of X and Y	=	1,20,000

Question 84:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Revaluation A/c	Dr.		14,700
	To Typewriter A/c				1,000
	To Fixed Assets A/c				13,700
	(Decrease in value of typewriter and fixed assets transferred to Revaluation Account)

	Stationery A/c	Dr.		1,000
	Investment A/c	Dr.		2,000
	To Revaluation A/c				3,000
	(Increase in stationery and investment transferred to Revaluation Account)

	X’s Capital A/c	Dr.		7,800
	Y’s Capital A/c	Dr.		3,900
	To Revaluation A/c				11,700
	(Revaluation loss transferred to X and Y’s Capital Account in their old ratio)

	Reserve Fund A/c	Dr.		18,000
	To X’s Capital A/c				12,000
	To Y’s Capital A/c				6,000
	(Reserve Fund distributed)

	Cash A/c	Dr.		55,000
	To Z’s Capital A/c				40,000
	To Premium for Goodwill A/c				15,000
	(Z brought capital and share of goodwill)

	Premium for Goodwill A/c	Dr.		15,000
	To X’s Capital A/c				10,000
	To Y’s Capital A/c				5,000
	(Premium for Goodwill distributed between X and Y in their sacrificing ratio i.e 2:1)

	X’s Capital A/c	Dr.		5,000
	Y’s Capital A/c	Dr.		2,500
	To Cash				7,500
	(Half of the Premium for Goodwill withdrawn by X and Y)

	X’s Capital A/c	Dr.		10,000
	To Investments A/c				10,000
	(X took over the Investment)

	Cash A/c	Dr.		4,800
	To X’s Capital A/c				4,800
	(X’ brought cash to make up deficiency in capital)

	Y’s Capital A/c	Dr.		26,600
	To Cash A/c				26,600
	(Y withdrew excess capital after all adjustments)

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	5,000	X’s Capital (Goodwill)	5,000
Z’s Capital	40,000	Y’s Capital (Goodwill)	2,500
Premium for Goodwill	15,000	Y’s Capital	26,600
X’s Capital	5,800	Balance c/d	31,700
	65,800		65,800

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Typewriter (5,000 × 20%)	1,000	Investment	2,000
Fixed Assets (1,37,000 × 10%)	13,700	Stationery	1,000
		Loss transferred to
		X Capital	7,800
		Y Capital	3,900
	14,700		14,700

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation	7,800	3,900		Balance b/d	75,000	62,000
Investment	10,000			Reserve Fund	12,000	6,000
Cash (withdraw of goodwill)	5,000	2,500		Cash			40,000
Balance c/d	74,200	66,600	40,000	Premium for Goodwill	10,000	5,000
	97,000	73,000	40,000		97,000	73,000	40,000
Cash		26,600		Balance b/d	74,200	66,600	40,000
Balance c/d adjusted	80,000	40,000	40,000	Cash	5,800
	80,000	66,600	40,000		80,000	66,600	40,000

Balance Sheet as on March 31, 2012 after Z’s admission
Liabilities		Amount Rs	Assets	Amount Rs
Sundry Creditors		25,000	Cash	31,700
Capital A/cs:			Sundry Debtors	15,000
X	80,000		Stock	10,000
Y	40,000		Typewriter (5,000 – 1,000)	4,000
Z	40,000	1,60,000	Fixed Assets (1,37,000 – 13,700)	1,23,300
			Stationery	1,000

		1,85,000		1,85,000

Working Notes:

WN1: Sacrificing Ratio

WN2: Distribution of Revaluation Loss

WN3: Distribution of Premium for Goodwill

WN4: Adjustment of Capital

Total Capital of the firm on the basis of Z’s share

Total Capital of the firm	=	1,60,000
Less: Z’s Capital	=	40,000
Combined Capital of X and Y	=	1,20,000

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Revaluation A/c	Dr.		11,000
	To Plant A/c				10,000
	To Reserve for Doubtful Debts				1,000
	(Decrease in Plant and Reserve after Doubtful Debt transferred to Revaluation Account)

	Patents A/c	Dr.		2,000
	Sundry Creditors A/c	Dr.		5,000
	To Revaluation A/c				7,000
	(Increase in Patents and decrease in Creditors transferred to Revaluation Account)

	A’s Capital A/c	Dr.		3,000
	B’s Capital A/c	Dr.		1,000
	To Revaluation A/c				4,000
	(Revaluation loss distributed between A and B in their old ratio)

	Bank A/c	Dr.		66,500
	To C’s Capital A/c				60,500
	To Premium for Goodwill A/c				6,000
	(C brought capital and share of goodwill)

	Premium for Goodwill A/c	Dr.		6,000
	To A’s Capital A/c				4,500
	To B’s Capital A/c				1,500
	(Premium for Goodwill distributed between A and B in sacrificing ratio i.e. 3:1)

	A’s Capital A/c	Dr.		15,000
	B’s Capital A/c	Dr.		5,000
	To Profit and Loss				20,000
	(Profit and Loss written-off)

	A’s Capital A/c	Dr.		15,000
	B’s Capital A/c	Dr.		5,000
	To Goodwill A/c				20,000
	(Goodwill written-off)

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Plant and Machinery	10,000	Patent	2,000
Reserve for Doubtful Debts (50,000 × 2%)	1,000	Sundry Creditors	5,000
		Loss transferred to
		A Capital	3,000
		B Capital	1,000
	11,000		11,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Profit and Loss	15,000	5,000		Balance b/d	2,00,000	80,000
Goodwill written-off	15,000	5,000		Premium for Goodwill	4,500	1,500
Revaluation	3,000	1,000
Balance c/d	1,71,500	70,500
	2,04,500	81,500			2,04,500	81,500
Balance c/d	1,71,500	70,500	60,500	Balance b/d	1,71,500	70,500
				Bank			60,500
	1,71,500	70,500	60,500		1,71,500	70,500	60,500

Balance Sheet as on April 01, 2012 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors (70,000 – 5,000)		65,000	Plant (1,00,000 – 10,000)		90,000
Capital A/cs:			Patents (10,000 + 2,000)		12,000
A	1,71,500		Stock		1,42,000
B	70,500		Sundry Debtors	50,000
C	60,500		Less: Reserve for D. Debts	(1,000)	49,000
		3,02,500	Cash at Bank		74,500
		3,67,500			3,67,500

Working Notes:

WN1

WN2

Distribution of Revaluation Loss (in old ratio)

WN3

Profit and Loss written−off (in old ratio)

WN4

Calculation of Goodwill

WN5

Distribution of C’s share of Goodwill

WN6

Writing-off of Goodwill (in old ratio)

WN7

Calculation of C’s share of Capital

Combine Capital of A and B after all adjustment = 1, 71,500 + 70,500

= Rs 2, 42,500

WN8

Calculation of closing balance of Cash at Bank

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	8,000
C’s Capital	60,500
Premium for Goodwill	6,000	Balance c/d	74,500
	74,500		74,500

Question 85:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Revaluation A/c	Dr.		11,000
	To Plant A/c				10,000
	To Reserve for Doubtful Debts				1,000
	(Decrease in Plant and Reserve after Doubtful Debt transferred to Revaluation Account)

	Patents A/c	Dr.		2,000
	Sundry Creditors A/c	Dr.		5,000
	To Revaluation A/c				7,000
	(Increase in Patents and decrease in Creditors transferred to Revaluation Account)

	A’s Capital A/c	Dr.		3,000
	B’s Capital A/c	Dr.		1,000
	To Revaluation A/c				4,000
	(Revaluation loss distributed between A and B in their old ratio)

	Bank A/c	Dr.		66,500
	To C’s Capital A/c				60,500
	To Premium for Goodwill A/c				6,000
	(C brought capital and share of goodwill)

	Premium for Goodwill A/c	Dr.		6,000
	To A’s Capital A/c				4,500
	To B’s Capital A/c				1,500
	(Premium for Goodwill distributed between A and B in sacrificing ratio i.e. 3:1)

	A’s Capital A/c	Dr.		15,000
	B’s Capital A/c	Dr.		5,000
	To Profit and Loss				20,000
	(Profit and Loss written-off)

	A’s Capital A/c	Dr.		15,000
	B’s Capital A/c	Dr.		5,000
	To Goodwill A/c				20,000
	(Goodwill written-off)

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Plant and Machinery	10,000	Patent	2,000
Reserve for Doubtful Debts (50,000 × 2%)	1,000	Sundry Creditors	5,000
		Loss transferred to
		A Capital	3,000
		B Capital	1,000
	11,000		11,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Profit and Loss	15,000	5,000		Balance b/d	2,00,000	80,000
Goodwill written-off	15,000	5,000		Premium for Goodwill	4,500	1,500
Revaluation	3,000	1,000
Balance c/d	1,71,500	70,500
	2,04,500	81,500			2,04,500	81,500
Balance c/d	1,71,500	70,500	60,500	Balance b/d	1,71,500	70,500
				Bank			60,500
	1,71,500	70,500	60,500		1,71,500	70,500	60,500

Balance Sheet as on April 01, 2012 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors (70,000 – 5,000)		65,000	Plant (1,00,000 – 10,000)		90,000
Capital A/cs:			Patents (10,000 + 2,000)		12,000
A	1,71,500		Stock		1,42,000
B	70,500		Sundry Debtors	50,000
C	60,500		Less: Reserve for D. Debts	(1,000)	49,000
		3,02,500	Cash at Bank		74,500
		3,67,500			3,67,500

Working Notes:

WN1

WN2

Distribution of Revaluation Loss (in old ratio)

WN3

Profit and Loss written−off (in old ratio)

WN4

Calculation of Goodwill

WN5

Distribution of C’s share of Goodwill

WN6

Writing-off of Goodwill (in old ratio)

WN7

Calculation of C’s share of Capital

Combine Capital of A and B after all adjustment = 1, 71,500 + 70,500

= Rs 2, 42,500

WN8

Calculation of closing balance of Cash at Bank

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	8,000
C’s Capital	60,500
Premium for Goodwill	6,000	Balance c/d	74,500
	74,500		74,500

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Employee Provident Fund	1,800	Stock (48,000 – 44,000)	4,000
Furniture (28,000 × 15%)	4,200	Prepaid Salaries	800
Machinery (34,000 × 15%)	5,100	Loss transferred to
Investments (32,000 × 15%)	4,800	A Capital	2,220
		B Capital	3,330
		C Capital	5,550
	15,900		15,900

Partners’ Capital Account
Dr.									Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D
Goodwill	4,000	6,000	10,000		Balance b/d	36,000	44,000	52,000
Revaluation (Loss)	2,220	3,330	5,550		Profit and Loss	2,800	4,200	7,000
					Bank				36,000
Balance c/d	33,380	40,070	45,450	36,000	D’s Current	800	1,200	2,000
	39,600	49,400	61,000	36,000		39,600	49,400	61,000	36,000

					Balance b/d	33,380	40,070	45,450	36,000
					Bank	2,620	13,930	44,550
Balance c/d (adjusted)	36,000	54,000	90,000	36,000
	36,000	54,000	90,000	36,000		36,000	54,000	90,000	36,000

Balance Sheet as on March 31, 2012 after D’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Cash at Bank	1,15,100
A	36,000		Bills Receivables	24,000
B	54,000		Furniture (28,000 – 4,200)	23,800
C	90,000		Stock	48,000
D	36,000	2,16,000	Debtors	42,000
Sundry Creditors		64,000	Investments (32,000 – 4,800)	27,200
Employee Provident Fund		33,800	Machinery (34,000 – 5,100)	28,900
			D’s Current	4,000
			Prepaid Salaries	800
		3,13,800		3,13,800

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	18,000
D’s Capital	36,000
A’s Capital	2,620
B’s Capital	13,930
C’s Capital	44,550	Balance c/d	1,15,100
	1,15,100		1,15,100

Working Notes:

WN1: Distribution of Revaluation Loss

WN2: Writing-off of Goodwill

Partners’ Capital Account will be debited as

WN3: Distribution of Profit and Loss (Profit)

WN4: Calculation of D's Share of Goodwill

Goodwill of the new firm = 24,000

WN5: Treatment of D’s Goodwill

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
D’s Current A/c	Dr.		4,000
To A’s Capital A/c				800
To B’s Capital A/c				1,200
To C’s Capital A/c				2,000
(D’s share of goodwill charged form his current account)

WN6: Adjustment of Capital

Question 86:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Employee Provident Fund	1,800	Stock (48,000 – 44,000)	4,000
Furniture (28,000 × 15%)	4,200	Prepaid Salaries	800
Machinery (34,000 × 15%)	5,100	Loss transferred to
Investments (32,000 × 15%)	4,800	A Capital	2,220
		B Capital	3,330
		C Capital	5,550
	15,900		15,900

Partners’ Capital Account
Dr.									Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D
Goodwill	4,000	6,000	10,000		Balance b/d	36,000	44,000	52,000
Revaluation (Loss)	2,220	3,330	5,550		Profit and Loss	2,800	4,200	7,000
					Bank				36,000
Balance c/d	33,380	40,070	45,450	36,000	D’s Current	800	1,200	2,000
	39,600	49,400	61,000	36,000		39,600	49,400	61,000	36,000

					Balance b/d	33,380	40,070	45,450	36,000
					Bank	2,620	13,930	44,550
Balance c/d (adjusted)	36,000	54,000	90,000	36,000
	36,000	54,000	90,000	36,000		36,000	54,000	90,000	36,000

Balance Sheet as on March 31, 2012 after D’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Cash at Bank	1,15,100
A	36,000		Bills Receivables	24,000
B	54,000		Furniture (28,000 – 4,200)	23,800
C	90,000		Stock	48,000
D	36,000	2,16,000	Debtors	42,000
Sundry Creditors		64,000	Investments (32,000 – 4,800)	27,200
Employee Provident Fund		33,800	Machinery (34,000 – 5,100)	28,900
			D’s Current	4,000
			Prepaid Salaries	800
		3,13,800		3,13,800

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	18,000
D’s Capital	36,000
A’s Capital	2,620
B’s Capital	13,930
C’s Capital	44,550	Balance c/d	1,15,100
	1,15,100		1,15,100

Working Notes:

WN1: Distribution of Revaluation Loss

WN2: Writing-off of Goodwill

Partners’ Capital Account will be debited as

WN3: Distribution of Profit and Loss (Profit)

WN4: Calculation of D's Share of Goodwill

Goodwill of the new firm = 24,000

WN5: Treatment of D’s Goodwill

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
D’s Current A/c	Dr.		4,000
To A’s Capital A/c				800
To B’s Capital A/c				1,200
To C’s Capital A/c				2,000
(D’s share of goodwill charged form his current account)

WN6: Adjustment of Capital

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Furniture	920	Land and Building (65,100 – 50,400)	14,700
Stock (29,400 × 10%)	2,940
Provision for Outstanding
Repair Bills	1,320
Profit transferred to
A's Capital A/c	4,080
B's Capital A/c	3,400
C's Capital A/c	2,040
	14,700		14,700

Partners’ Capital Account
Dr.									Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D
					Balance b/d	36,900	33,600	19,800
					Cash				16,000
					Premium for Goodwill	3,780	3,150	1,890
Balance c/d	44,760	40,150	23,730	16,000	Revaluation (Profit)	4,080	3,400	2,040
	44,760	40,150	23,730	16,000		44,760	40,150	23,730	16,000
Cash		150			Balance b/d	44,760	40,150	23,730
Balance c/d (adjusted)	48,000	40,000	24,000	16,000	Cash	3,240		270	16,000
	48,000	40,150	24,000	16,000		48,000	40,150	24,000	16,000

Balance Sheet after D’s adjustment
Liabilities		Amount Rs	Assets	Amount Rs

Creditors		18,900	Land and Building	65,100
Bills Payable		6,300
Provision for outstanding
Repair Bills		1,320	Furniture (7,350 – 920)	6,430
Capital A/cs:			Stock (29,400 – 2,940)	26,460
A	48,000		Debtors	26,460
B	40,000		Cash	30,070
C	24,000
D	16,000	1,28,000

		1,54,520		1,54,520

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	1,890	B’s Capital	150
D’s Capital	16,000
Premium for Goodwill	8,820	Balance c/d	30,070
A’s Capital	3,240
C’s Capital	270
	30,220		30,220

Working Notes-

WN1

WN2

Distribution of Revaluation Profit

WN3

Distribution of Premium for Goodwill

WN4

Adjustment of Capital

Question 87:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Furniture	920	Land and Building (65,100 – 50,400)	14,700
Stock (29,400 × 10%)	2,940
Provision for Outstanding
Repair Bills	1,320
Profit transferred to
A's Capital A/c	4,080
B's Capital A/c	3,400
C's Capital A/c	2,040
	14,700		14,700

Partners’ Capital Account
Dr.									Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D
					Balance b/d	36,900	33,600	19,800
					Cash				16,000
					Premium for Goodwill	3,780	3,150	1,890
Balance c/d	44,760	40,150	23,730	16,000	Revaluation (Profit)	4,080	3,400	2,040
	44,760	40,150	23,730	16,000		44,760	40,150	23,730	16,000
Cash		150			Balance b/d	44,760	40,150	23,730
Balance c/d (adjusted)	48,000	40,000	24,000	16,000	Cash	3,240		270	16,000
	48,000	40,150	24,000	16,000		48,000	40,150	24,000	16,000

Balance Sheet after D’s adjustment
Liabilities		Amount Rs	Assets	Amount Rs

Creditors		18,900	Land and Building	65,100
Bills Payable		6,300
Provision for outstanding
Repair Bills		1,320	Furniture (7,350 – 920)	6,430
Capital A/cs:			Stock (29,400 – 2,940)	26,460
A	48,000		Debtors	26,460
B	40,000		Cash	30,070
C	24,000
D	16,000	1,28,000

		1,54,520		1,54,520

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	1,890	B’s Capital	150
D’s Capital	16,000
Premium for Goodwill	8,820	Balance c/d	30,070
A’s Capital	3,240
C’s Capital	270
	30,220		30,220

Working Notes-

WN1

WN2

Distribution of Revaluation Profit

WN3

Distribution of Premium for Goodwill

WN4

Adjustment of Capital

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Plant and Machinery (4,000 × 10%)	400	Stock (24,940 – 22,000)	2,940
Provision for Bad Debts	500
Profit transferred to
A Capital	1,360
B Capital	680
	2,940		2,940

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	15,000	10,000
				Cash			10,000
				Premium for Goodwill	2,000	1,000
Balance c/d	18,360	11,680	10,000	Revaluation	1,360	680
	18,360	11,680	10,000		18,360	11,680	10,000
Cash		1,680		Balance c/d	18,360	11,680	10,000
Balance c/d	20,000	10,000	10,000	Cash	1,640
(Adjusted)
	20,000	11,680	10,000		20,000	11,680	10,000

Balance Sheet as on March 31, 2012 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors		2,000	Cash		13,960
Bank Overdraft		15,000	Sundry Debtors	15,000
Capital A/cs:			Less: Prov. for Bad Debts	500	14,500
A	20,000		Stock		24,940
B	10,000		Plant and Machinery		3,600
C	10,000	40,000

		57,000			57,000

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	1,000	B’s Capital	1,680
C’s Capital	10,000
Premium for Goodwill	3,000
A’s Capital	1,640	Balance c/d	13,960

	15,640		15,640

Working Notes

WN1: Sacrificing Ratio

WN2: Distribution of Premium for Goodwill

WN3: Distribution of Revaluation Profit

WN4: Adjustment of Capital’s (in new ratio)

Question 88:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Plant and Machinery (4,000 × 10%)	400	Stock (24,940 – 22,000)	2,940
Provision for Bad Debts	500
Profit transferred to
A Capital	1,360
B Capital	680
	2,940		2,940

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	15,000	10,000
				Cash			10,000
				Premium for Goodwill	2,000	1,000
Balance c/d	18,360	11,680	10,000	Revaluation	1,360	680
	18,360	11,680	10,000		18,360	11,680	10,000
Cash		1,680		Balance c/d	18,360	11,680	10,000
Balance c/d	20,000	10,000	10,000	Cash	1,640
(Adjusted)
	20,000	11,680	10,000		20,000	11,680	10,000

Balance Sheet as on March 31, 2012 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors		2,000	Cash		13,960
Bank Overdraft		15,000	Sundry Debtors	15,000
Capital A/cs:			Less: Prov. for Bad Debts	500	14,500
A	20,000		Stock		24,940
B	10,000		Plant and Machinery		3,600
C	10,000	40,000

		57,000			57,000

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	1,000	B’s Capital	1,680
C’s Capital	10,000
Premium for Goodwill	3,000
A’s Capital	1,640	Balance c/d	13,960

	15,640		15,640

Working Notes

WN1: Sacrificing Ratio

WN2: Distribution of Premium for Goodwill

WN3: Distribution of Revaluation Profit

WN4: Adjustment of Capital’s (in new ratio)

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Plant and Machinery (70,000 – 60,000)	10,000	Land and Building (65,000 – 40,000)	25,000
Profit transferred to		Provision for Doubtful Debts	400
A Capital	12,450	Creditors	1,200
B Capital	4,150

	26,600		26,600

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	50,000	80,000
				General Reserve	7,500	2,500
				Revaluation (Profit)	12,450	4,150
				Cash			60,000
Balance c/d	74,450	88,150	60,000	Premium for Goodwill	4,500	1,500
	74,450	88,150	60,000		74,450	88,150	60,000

B’s Current		43,150		Balance b/d	74,450	88,150	60,000
Balance c/d (Adjusted)	1,35,000	45,000	60,000	A’s Current	60,550
	1,35,000	88,150	60,000		1,35,000	88,150	60,000

Balance Sheet as on April 01, 2013 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors (70,000 – 1,200)		68,800	Land and Building		65,000
Capital A/cs:			Plant and Machinery		60,000
A	1,35,000		Stock		30,000
B	45,000		Debtors	35,000
C	60,000	2,40,000	Less: Prov. for Doubtful Debts	600	34,400
B’s Current A/c		43,150	Investments		26,000
			Cash		76,000
			A’s Current A/c		60,550

		3,51,950			3,51,950

Working Notes:

WN1

WN2

WN3 Distribution of Revaluation Profit

WN4 Adjustment of Capital

Total Capital of the firm after C’s admission	=	60,000 × 4	=	2,40,000
Less: C’s Capital			=	60,000
Combined Capital of A and B			=	1, 80,000

WN5

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	10,000
C’s Capital	60,000	Balance c/d	76,000
Premium for Goodwill	6,000	(Balancing Figure)
	76,000		76,000

Question 89:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Plant and Machinery (70,000 – 60,000)	10,000	Land and Building (65,000 – 40,000)	25,000
Profit transferred to		Provision for Doubtful Debts	400
A Capital	12,450	Creditors	1,200
B Capital	4,150

	26,600		26,600

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	50,000	80,000
				General Reserve	7,500	2,500
				Revaluation (Profit)	12,450	4,150
				Cash			60,000
Balance c/d	74,450	88,150	60,000	Premium for Goodwill	4,500	1,500
	74,450	88,150	60,000		74,450	88,150	60,000

B’s Current		43,150		Balance b/d	74,450	88,150	60,000
Balance c/d (Adjusted)	1,35,000	45,000	60,000	A’s Current	60,550
	1,35,000	88,150	60,000		1,35,000	88,150	60,000

Balance Sheet as on April 01, 2013 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors (70,000 – 1,200)		68,800	Land and Building		65,000
Capital A/cs:			Plant and Machinery		60,000
A	1,35,000		Stock		30,000
B	45,000		Debtors	35,000
C	60,000	2,40,000	Less: Prov. for Doubtful Debts	600	34,400
B’s Current A/c		43,150	Investments		26,000
			Cash		76,000
			A’s Current A/c		60,550

		3,51,950			3,51,950

Working Notes:

WN1

WN2

WN3 Distribution of Revaluation Profit

WN4 Adjustment of Capital

Total Capital of the firm after C’s admission	=	60,000 × 4	=	2,40,000
Less: C’s Capital			=	60,000
Combined Capital of A and B			=	1, 80,000

WN5

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	10,000
C’s Capital	60,000	Balance c/d	76,000
Premium for Goodwill	6,000	(Balancing Figure)
	76,000		76,000

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Patents	1,000	Provision for Doubtful Debts	2,000
Profit on transferred to		Typewriter	2,400
Pappu Capital	2,550
Dhanraj Capital	850
	4,400		4,400

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Pappu	Dhanraj	Leander	Particulars	Pappu	Dhanraj	Leander
				Balance b/d	60,000	20,000
Balance c/d	90,550	24,850		Reserve Fund	12,000	4,000
(after adjustments)				Revaluation	2,550	850
				Premium for Goodwill	16,000
	90,550	24,850			90,550	24,850
				Balance c/d	90,550	24,850
				Cash			69,240
Balance c/d	90,550	24,850	69,240
	90,550	24,850	69,240		90,550	24,850	69,240

Balance Sheet as on March 31, 2012 after Leander’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		30,000	Debtors	50,000
Bills Receivable		1,000	Less: Prov. for D. Debts	3,000	47,000
Outstanding Salary		3,000	Stock		30,000
Capital A/cs:			Bills Receivable		10,000
Pappu	90,550		Machinery		40,000
Dhanraj	24,850		Typewriter		2,400
Leander	69,240	1,84,640	Cash		89,240

		2,18,640			2,18,640

Working Notes

WN1

Leander acquires his share of profit from Pappu only. Therefore, amount for goodwill brought by Leander will be taken by Pappu alone.

WN2

Distribution of Revaluation Profit

WN3

Distribution of Reserve Fund

WN4

Calculation of Leander’s Capital

Combined Capital of Pappu and Dhanraj after all adjustments = 90,550 + 24,850 = 1, 15,400

Combined share of profit of Pappu and Dhanraj = 1 − Leander share

Total Capital of the firm on the basis of combined capital of Pappu and Dhanraj

WN5

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	4,000
Leander’s Capital	69,240
Premium for Goodwill	16,000	Balance c/d	89,240

	89,240		89,240

Question 90:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Patents	1,000	Provision for Doubtful Debts	2,000
Profit on transferred to		Typewriter	2,400
Pappu Capital	2,550
Dhanraj Capital	850
	4,400		4,400

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Pappu	Dhanraj	Leander	Particulars	Pappu	Dhanraj	Leander
				Balance b/d	60,000	20,000
Balance c/d	90,550	24,850		Reserve Fund	12,000	4,000
(after adjustments)				Revaluation	2,550	850
				Premium for Goodwill	16,000
	90,550	24,850			90,550	24,850
				Balance c/d	90,550	24,850
				Cash			69,240
Balance c/d	90,550	24,850	69,240
	90,550	24,850	69,240		90,550	24,850	69,240

Balance Sheet as on March 31, 2012 after Leander’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		30,000	Debtors	50,000
Bills Receivable		1,000	Less: Prov. for D. Debts	3,000	47,000
Outstanding Salary		3,000	Stock		30,000
Capital A/cs:			Bills Receivable		10,000
Pappu	90,550		Machinery		40,000
Dhanraj	24,850		Typewriter		2,400
Leander	69,240	1,84,640	Cash		89,240

		2,18,640			2,18,640

Working Notes

WN1

Leander acquires his share of profit from Pappu only. Therefore, amount for goodwill brought by Leander will be taken by Pappu alone.

WN2

Distribution of Revaluation Profit

WN3

Distribution of Reserve Fund

WN4

Calculation of Leander’s Capital

Combined Capital of Pappu and Dhanraj after all adjustments = 90,550 + 24,850 = 1, 15,400

Combined share of profit of Pappu and Dhanraj = 1 − Leander share

Total Capital of the firm on the basis of combined capital of Pappu and Dhanraj

WN5

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	4,000
Leander’s Capital	69,240
Premium for Goodwill	16,000	Balance c/d	89,240

	89,240		89,240

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Plant (650 – 500)	150	Reserve for Doubtful Debts	300
Profit transferred to		(400 – 100)
Mohan Capital	390	Stock	500
Sohan Capital	260
	800		800

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Mohan	Sohan	Rohan	Particulars	Mohan	Sohan	Rohan
				Balance b/d	2,000	1,000
Balance c/d	2,990	1,660		Revaluation	390	260
(after adjustments)				Premium for Goodwill	600	400
	2,990	1,660			2,990	1,660
				Balance b/d	2,990	1,660
Balance c/d	2,990	1,660	2,325	Cash			2,325
	2,990	1,660	2,325		2,990	1,660	2,325

Balance Sheet as on March 31, 2012 after Rohan’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Cash		3,975
Mohan	2,990		Debtors	1,000
Sohan	1,660		Less: Reserve for D. Debts	100	900
Rohan	2,325	6,975	Stock		2,000
Creditors		400	Plant		500

		7,375			7,375

Working Notes

WN1

WN2

Distribution of Premium for Goodwill

WN3

Distribution of Revaluation Profit

WN4

Calculation Rohan’s Capital

Combined Capital of Mohan and Sohan after all adjustments = 2,990 + 1,660

= Rs 4,650

Total Capital of the firm on the basis of combined capital of Mohan and Sohan

WN5

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	650
Rohan’s Capital	2,325
Premium for Goodwill	1,000	Balance c/d	3,975
	3,975		3,975

Question 91:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Plant (650 – 500)	150	Reserve for Doubtful Debts	300
Profit transferred to		(400 – 100)
Mohan Capital	390	Stock	500
Sohan Capital	260
	800		800

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Mohan	Sohan	Rohan	Particulars	Mohan	Sohan	Rohan
				Balance b/d	2,000	1,000
Balance c/d	2,990	1,660		Revaluation	390	260
(after adjustments)				Premium for Goodwill	600	400
	2,990	1,660			2,990	1,660
				Balance b/d	2,990	1,660
Balance c/d	2,990	1,660	2,325	Cash			2,325
	2,990	1,660	2,325		2,990	1,660	2,325

Balance Sheet as on March 31, 2012 after Rohan’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Cash		3,975
Mohan	2,990		Debtors	1,000
Sohan	1,660		Less: Reserve for D. Debts	100	900
Rohan	2,325	6,975	Stock		2,000
Creditors		400	Plant		500

		7,375			7,375

Working Notes

WN1

WN2

Distribution of Premium for Goodwill

WN3

Distribution of Revaluation Profit

WN4

Calculation Rohan’s Capital

Combined Capital of Mohan and Sohan after all adjustments = 2,990 + 1,660

= Rs 4,650

Total Capital of the firm on the basis of combined capital of Mohan and Sohan

WN5

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	650
Rohan’s Capital	2,325
Premium for Goodwill	1,000	Balance c/d	3,975
	3,975		3,975

Answer:

	Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Apr. 01	Revaluation A/c	Dr.		18,000
	To Investments A/c				12,000
	To Plant A/c				6,000
	(Decrease in investments and plant transferred to Revaluation Account)

Apr. 01	Creditors A/c	Dr.		3,000
	To Revaluation A/c				3,000
	(Decrease in creditors transferred to Revaluation Account)

Apr. 01	Hari’s Capital A/c	Dr.		15,000
	Ram’s Capital A/c	Dr.			7,500
	To Revaluation A/c				7,500
	(Revaluation loss distributed between Hari and Ram in their old ratio i.e. 1:1)

Apr. 01	Bank A/c	Dr.		63,000
	To Suraj’s Capital A/c				23,000
	To Premium for Goodwill A/c				40,000
	(Suraj brought capital and share of goodwill)

Apr. 01	Premium for Goodwill A/c	Dr.		40,000
	To Hari’s Capital A/c				40,000
	(Goodwill brought by Suraj transferred to Hari’s Capital Account)

Apr. 01	Hari’s Capital A/c	Dr.		30,000
	To Bank A/c				30,000
	(Hari withdraw Rs 30,000 on account of goodwill)
2012
Mar. 31	Profit and Loss appropriate A/c	Dr.		60,000
	To Hari’s Capital A/c				20,000
	To Ram’s Capital A/c				30,000
	To Suraj’s Capital A/c				10,000
	(Profit earned after Suraj’s admission distributed)

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Investments (30,000 – 18,000)	12,000	Creditors	3,000
Plant (35,000 – 29,000)	6,000	Loss transferred to
		Hari Capital	7,500
		Ram Capital	7,500
	18,000		18,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Hari	Ram	Suraj	Particulars	Hari	Ram	Suraj
Revaluation	7,500	7,500		Balance b/d	60,000	60,000
Bank (withdrawal of Goodwill)	30,000			Premium for Goodwill	40,000
Balance c/d	62,500	52,500
	1,00,000	60,000			1,00,000	60,000
Bank (Drawings)	15,000	22,500	7,500	Balance c/d	62,500	52,500
				Bank			23,000
Balance c/d	67,500	60,000	25,500	Profit and Loss Appropriation	20,000	30,000	10,000
	82,500	82,500	33,000		82,500	82,500	33,000

Balance Sheet as on March 31, 2012
Liabilities		Amount Rs	Assets	Amount Rs

Creditors (1,05,000 – 3,000)		1,02,000	Cash at Bank	88,000
Capital A/cs:			Book Debts	60,000
Hari	67,500		Stock	50,000
Ram	60,000		Investments (30,000 – 12,000)	18,000
Suraj	25,500	1,53,000	Furniture	10,000
			Plant	29,000
		2,55,000		2,55,000

Working Notes

WN1

Hari Sacrifices share in favour of Suraj

WN2

Calculation of Suraj’s Capital

Let the combined share of all partners be = 1

Combined share of Hari and Ram = 1 − Suraj’s share

Combined Capital of Hari and Ram after all adjustments = 62,500 + 52,500 = Rs 1,15,000

WN3

Distribution of Profit earned after Suraj’s admission

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	40,000	Hari’s Capital (Goodwill)	30,000
Suraj’s Capital	23,000	Hari’s Capital (Drawings)	15,000
Premium for Goodwill	40,000	Ram’s Capital (Drawings)	22,500
Revenue (Profit)	60,000	Suraj’s Capital (Drawings)	7,500
		Balance c/d	88,000
	1,63,000		1,63,000

WN4

Journal entry for recording drawings of partners

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Hari’s Capital A/c	Dr.		15,000
Ram’s Capital A/c	Dr.		22,500
Suraj’s Capital A/c	Dr.		7,500
To Bank A/c				45,000
(Drawings made by partners)

Question 92:

	Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
Apr. 01	Revaluation A/c	Dr.		18,000
	To Investments A/c				12,000
	To Plant A/c				6,000
	(Decrease in investments and plant transferred to Revaluation Account)

Apr. 01	Creditors A/c	Dr.		3,000
	To Revaluation A/c				3,000
	(Decrease in creditors transferred to Revaluation Account)

Apr. 01	Hari’s Capital A/c	Dr.		15,000
	Ram’s Capital A/c	Dr.			7,500
	To Revaluation A/c				7,500
	(Revaluation loss distributed between Hari and Ram in their old ratio i.e. 1:1)

Apr. 01	Bank A/c	Dr.		63,000
	To Suraj’s Capital A/c				23,000
	To Premium for Goodwill A/c				40,000
	(Suraj brought capital and share of goodwill)

Apr. 01	Premium for Goodwill A/c	Dr.		40,000
	To Hari’s Capital A/c				40,000
	(Goodwill brought by Suraj transferred to Hari’s Capital Account)

Apr. 01	Hari’s Capital A/c	Dr.		30,000
	To Bank A/c				30,000
	(Hari withdraw Rs 30,000 on account of goodwill)
2012
Mar. 31	Profit and Loss appropriate A/c	Dr.		60,000
	To Hari’s Capital A/c				20,000
	To Ram’s Capital A/c				30,000
	To Suraj’s Capital A/c				10,000
	(Profit earned after Suraj’s admission distributed)

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Investments (30,000 – 18,000)	12,000	Creditors	3,000
Plant (35,000 – 29,000)	6,000	Loss transferred to
		Hari Capital	7,500
		Ram Capital	7,500
	18,000		18,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Hari	Ram	Suraj	Particulars	Hari	Ram	Suraj
Revaluation	7,500	7,500		Balance b/d	60,000	60,000
Bank (withdrawal of Goodwill)	30,000			Premium for Goodwill	40,000
Balance c/d	62,500	52,500
	1,00,000	60,000			1,00,000	60,000
Bank (Drawings)	15,000	22,500	7,500	Balance c/d	62,500	52,500
				Bank			23,000
Balance c/d	67,500	60,000	25,500	Profit and Loss Appropriation	20,000	30,000	10,000
	82,500	82,500	33,000		82,500	82,500	33,000

Balance Sheet as on March 31, 2012
Liabilities		Amount Rs	Assets	Amount Rs

Creditors (1,05,000 – 3,000)		1,02,000	Cash at Bank	88,000
Capital A/cs:			Book Debts	60,000
Hari	67,500		Stock	50,000
Ram	60,000		Investments (30,000 – 12,000)	18,000
Suraj	25,500	1,53,000	Furniture	10,000
			Plant	29,000
		2,55,000		2,55,000

Working Notes

WN1

Hari Sacrifices share in favour of Suraj

WN2

Calculation of Suraj’s Capital

Let the combined share of all partners be = 1

Combined share of Hari and Ram = 1 − Suraj’s share

Combined Capital of Hari and Ram after all adjustments = 62,500 + 52,500 = Rs 1,15,000

WN3

Distribution of Profit earned after Suraj’s admission

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	40,000	Hari’s Capital (Goodwill)	30,000
Suraj’s Capital	23,000	Hari’s Capital (Drawings)	15,000
Premium for Goodwill	40,000	Ram’s Capital (Drawings)	22,500
Revenue (Profit)	60,000	Suraj’s Capital (Drawings)	7,500
		Balance c/d	88,000
	1,63,000		1,63,000

WN4

Journal entry for recording drawings of partners

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Hari’s Capital A/c	Dr.		15,000
Ram’s Capital A/c	Dr.		22,500
Suraj’s Capital A/c	Dr.		7,500
To Bank A/c				45,000
(Drawings made by partners)

Answer:

Revaluation Account
Dr.			Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Stock		10,000	Plant	14,000
Profit on Revaluation transferred to:			Creditors	3,000
Sarthak’s Capital A/c	8,000		Investments	5,000
Vansh’s Capital A/c	4,000	12,000
		22,000		22,000

Partners’ Capital Accounts
Dr.				Cr.
Particulars	Sarthak	Vansh	Mansi	Particulars	Sarthak	Vansh	Mansi
Investment	20,000			Balance b/d	70,000	60,000
				Cash A/c			1,00,000
				Premium for Goodwill A/c	40,000	20,000
Balance c/d	1,10,000	90,000	1,00,000	General Reserve	12,000	6,000
				Revaluation A/c (Profit)	8,000	4,000
	1,30,000	90,000	1,00,000		1,30,000	90,000	1,00,000

Balance Sheet after Mansi’ Admission
Liabilities	Amount Rs	Assets		Amount Rs
Capital A/c :		Plant		80,000
Sarthak	1,10,000	Furniture		30,000
Vansh	90,000	Investments		25,000
Mansi	1,00,000	Stock (46,000 – 10,000)		36,000
Bank Loan	18,000	Debtors	38,000
Creditors (72,000 – 3,000)	69,000	Less: Provision for Doubtful Debts	(4,000)	34,000
		Cash (22,000+60,000+1,00,000)		1,82,000
	3,87,000			3,87,000

Working Notes:

Calculation of Capital brought in by Mansi
Old Ratio = 2 : 1
Mansi is admitted for 1/3^rd share
Let Total Profit be 1

Adjusted Old Capital of Sarthak = 1,30,000 – 20,000 = 1,10,000
Adjusted Old Capital of Vansh = 90,000
Total Adjusted Capital of Sarthak and Vansh = 1,10,000 + 90,000 = 2,00,000

The following are the values involved in the scenario depicted in the question.
1. Valuing friendship and helping friends.
2. Sympathy and sensitivity towards differently abled individuals.

Question 93:

Revaluation Account
Dr.			Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Stock		10,000	Plant	14,000
Profit on Revaluation transferred to:			Creditors	3,000
Sarthak’s Capital A/c	8,000		Investments	5,000
Vansh’s Capital A/c	4,000	12,000
		22,000		22,000

Partners’ Capital Accounts
Dr.				Cr.
Particulars	Sarthak	Vansh	Mansi	Particulars	Sarthak	Vansh	Mansi
Investment	20,000			Balance b/d	70,000	60,000
				Cash A/c			1,00,000
				Premium for Goodwill A/c	40,000	20,000
Balance c/d	1,10,000	90,000	1,00,000	General Reserve	12,000	6,000
				Revaluation A/c (Profit)	8,000	4,000
	1,30,000	90,000	1,00,000		1,30,000	90,000	1,00,000

Balance Sheet after Mansi’ Admission
Liabilities	Amount Rs	Assets		Amount Rs
Capital A/c :		Plant		80,000
Sarthak	1,10,000	Furniture		30,000
Vansh	90,000	Investments		25,000
Mansi	1,00,000	Stock (46,000 – 10,000)		36,000
Bank Loan	18,000	Debtors	38,000
Creditors (72,000 – 3,000)	69,000	Less: Provision for Doubtful Debts	(4,000)	34,000
		Cash (22,000+60,000+1,00,000)		1,82,000
	3,87,000			3,87,000

Working Notes:

Calculation of Capital brought in by Mansi
Old Ratio = 2 : 1
Mansi is admitted for 1/3^rd share
Let Total Profit be 1

Adjusted Old Capital of Sarthak = 1,30,000 – 20,000 = 1,10,000
Adjusted Old Capital of Vansh = 90,000
Total Adjusted Capital of Sarthak and Vansh = 1,10,000 + 90,000 = 2,00,000

The following are the values involved in the scenario depicted in the question.
1. Valuing friendship and helping friends.
2. Sympathy and sensitivity towards differently abled individuals.

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

		Building (18,000 – 8,000)	10,000
Profit transferred to		Stock (16,000 – 12,000)	4,000
X Capital	8,400
Y Capital	5,600
	14,000		14,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
				Balance b/d	10,000	8,000
				General Reserve	9,600	6,400
				Workmen’s Compensation Fund	1,200	800
Balance c/d	39,200	20,800		Revaluation (Profit)	8,400	5,600
				Premium for Goodwill	10,000
	39,200	20,800			39,200	20,800
				Balance b/d	39,200	20,800
				Cash			12,000
Balance c/d	39,200	20,800	12,000
	39,200	20,800	12,000		39,200	20,800	12,000

Balance Sheet as on March 31, 2012 after Z’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Cash in Hand	31,000
X	39,200		Debtors	11,000
Y	20,800		Stock	16,000
Z	12,000	72,000	Building	18,000
Creditors		12,000	Machinery	10,000
Outstanding Workmen’s Compensation Claim		2,000

		86,000		86,000

Working Notes

WN1: Sacrificing Ratio

Only X is sacrificing 1/5 portion of profit in favour of Z. Therefore, amount of Premium for Goodwill will be taken by X only.

WN2: Treatment of Workmen Compensation Fund

Particulars		L.F.	Debit AmountRs	Credit AmountRs

Workmen’s Compensation Fund A/c	Dr.		4,000
To Outstanding Workmen’s Compensation Claim A/c				2,000
To X’s Capital A/c	Dr.			1,200
To Y’s Capital A/c				800
(Outstanding Workmen’s Compensation charged from the fund and remaining fund transferred to partner’s capital in their old ratio)

WN3: Calculation of Z’s Capital

Combined Capital of X and Y after all adjustments = 39,200 + 20,800 = Rs 60,000

Z’s Capital

WN4: Calculation of Cash Balance

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	9,000
Z’s Capital	12,000
Premium for Goodwill	10,000	Balance c/d	31,000
	31,000		31,000

Question 94:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

		Building (18,000 – 8,000)	10,000
Profit transferred to		Stock (16,000 – 12,000)	4,000
X Capital	8,400
Y Capital	5,600
	14,000		14,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
				Balance b/d	10,000	8,000
				General Reserve	9,600	6,400
				Workmen’s Compensation Fund	1,200	800
Balance c/d	39,200	20,800		Revaluation (Profit)	8,400	5,600
				Premium for Goodwill	10,000
	39,200	20,800			39,200	20,800
				Balance b/d	39,200	20,800
				Cash			12,000
Balance c/d	39,200	20,800	12,000
	39,200	20,800	12,000		39,200	20,800	12,000

Balance Sheet as on March 31, 2012 after Z’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Cash in Hand	31,000
X	39,200		Debtors	11,000
Y	20,800		Stock	16,000
Z	12,000	72,000	Building	18,000
Creditors		12,000	Machinery	10,000
Outstanding Workmen’s Compensation Claim		2,000

		86,000		86,000

Working Notes

WN1: Sacrificing Ratio

Only X is sacrificing 1/5 portion of profit in favour of Z. Therefore, amount of Premium for Goodwill will be taken by X only.

WN2: Treatment of Workmen Compensation Fund

Particulars		L.F.	Debit AmountRs	Credit AmountRs

Workmen’s Compensation Fund A/c	Dr.		4,000
To Outstanding Workmen’s Compensation Claim A/c				2,000
To X’s Capital A/c	Dr.			1,200
To Y’s Capital A/c				800
(Outstanding Workmen’s Compensation charged from the fund and remaining fund transferred to partner’s capital in their old ratio)

WN3: Calculation of Z’s Capital

Combined Capital of X and Y after all adjustments = 39,200 + 20,800 = Rs 60,000

Z’s Capital

WN4: Calculation of Cash Balance

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	9,000
Z’s Capital	12,000
Premium for Goodwill	10,000	Balance c/d	31,000
	31,000		31,000

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Plant	7,000	Building	14,000
Provision for D. Debts (1,000 – 300)	700
Profit transferred to
Jain Capital	3,600
Gupta Capital	2,700
	14,000		14,000

Partner’s Capital Accounts
Dr.							Cr.
	Jain	Gupta	Mishra	Particulars	Jain	Gupta	Mishra
				Balance b/d	70,000	60,000
				Revaluation	3,600	2,700
Balance c/d	85,600	71,700		Premium for Goodwill	12,000	9,000
	85,600	71,700			85,600	71,700
				Balance b/d	85,600	71,700
				Cash			52,433
Balance c/d	85,600	71,700	52,433
	85,600	71,700	52,433		85,600	71,700	52,433

Balance Sheet as on April 01, 2012 after Mishra’s admission
Liabilities		Amount Rs	Particulars		Amount Rs

Sundry Creditors		20,000	Cash		88,233
Bills Payable		3,000	Debtors	20,500
Bank Over draft		17,000	Less: Prov. for D. Debts	1,000	19,500
Capital A/cs:			Stock		20,000
Jain	85,600		Plant (40,000 – 7,000)		33,000
Gupta	71,700		Building (75,000 + 14,000)		89,000
Mishra	52,433	2,09,733
		2,49,733			2,49,733

Working Notes

WN1

WN2

Distribution of Revaluation Profit

WN3

Calculation of Mishra’s Capital

Combined Capital of Jain and Gupta after all adjustments = 85,600 + 71,700 = Rs 1,57,300

WN4

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	14,800
Mishra’s Capital A/c	52,433
Premium for Goodwill	21,000	Balance c/d	88,233
	88,233		88,233

Question 95:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Plant	7,000	Building	14,000
Provision for D. Debts (1,000 – 300)	700
Profit transferred to
Jain Capital	3,600
Gupta Capital	2,700
	14,000		14,000

Partner’s Capital Accounts
Dr.							Cr.
	Jain	Gupta	Mishra	Particulars	Jain	Gupta	Mishra
				Balance b/d	70,000	60,000
				Revaluation	3,600	2,700
Balance c/d	85,600	71,700		Premium for Goodwill	12,000	9,000
	85,600	71,700			85,600	71,700
				Balance b/d	85,600	71,700
				Cash			52,433
Balance c/d	85,600	71,700	52,433
	85,600	71,700	52,433		85,600	71,700	52,433

Balance Sheet as on April 01, 2012 after Mishra’s admission
Liabilities		Amount Rs	Particulars		Amount Rs

Sundry Creditors		20,000	Cash		88,233
Bills Payable		3,000	Debtors	20,500
Bank Over draft		17,000	Less: Prov. for D. Debts	1,000	19,500
Capital A/cs:			Stock		20,000
Jain	85,600		Plant (40,000 – 7,000)		33,000
Gupta	71,700		Building (75,000 + 14,000)		89,000
Mishra	52,433	2,09,733
		2,49,733			2,49,733

Working Notes

WN1

WN2

Distribution of Revaluation Profit

WN3

Calculation of Mishra’s Capital

Combined Capital of Jain and Gupta after all adjustments = 85,600 + 71,700 = Rs 1,57,300

WN4

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	14,800
Mishra’s Capital A/c	52,433
Premium for Goodwill	21,000	Balance c/d	88,233
	88,233		88,233

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Machinery	7,000	Furniture	3,000
Stock	1,000	Loss transferred to
		B's Capital A/c	3,000
		C's Capital A/c	2,000
	8,000		8,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	B	C	A	Particulars	B	C	A
Revaluation	3,000	2,000		Balance b/d	30,000	10,000
				Profit and Loss	4,500	3,000
				Cash			20,000
Balance c/d	33,600	12,400	20,000	Premium for Goodwill	2,100	1,400
	36,600	14,400	20,000		36,600	14,400	20,000
				Balance b/d	33,600	12,400	20,000
Cash	9,600			Cash		3,600
Balance c/d (proportionate)	24,000	16,000	20,000
	33,000	16,000	20,000		33,600	16,000	20,000

Balance Sheet as on April 01, 2012 after A’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Machinery (18,000 – 7,000)	11,000
B	24,000		Furniture (18,000 + 3,000)	21,000
C	16,000		Investments	9,000
A	20,000	60,000	Stock (6,000 – 1,000)	5,000
Creditors		7,000	Debtors	4,000
Bills Payable		2,500	Cash	19,500
		69,500		69,500

Working Notes

WN1: Calculation of New Profit Sharing Ratio

Let the Combined share of profit of all partners after A’s admission be = 1

WN2: Calculation of Proportionate Capital

WN3: Calculation of Cash Balance

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	2,000	B’s Capital	9,600
A’s Capital	20,000
Premium for Goodwill	3,500	Balance c/d	19,500
C’s Capital	3,600
	29,100		29,100

Question 96:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Machinery	7,000	Furniture	3,000
Stock	1,000	Loss transferred to
		B's Capital A/c	3,000
		C's Capital A/c	2,000
	8,000		8,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	B	C	A	Particulars	B	C	A
Revaluation	3,000	2,000		Balance b/d	30,000	10,000
				Profit and Loss	4,500	3,000
				Cash			20,000
Balance c/d	33,600	12,400	20,000	Premium for Goodwill	2,100	1,400
	36,600	14,400	20,000		36,600	14,400	20,000
				Balance b/d	33,600	12,400	20,000
Cash	9,600			Cash		3,600
Balance c/d (proportionate)	24,000	16,000	20,000
	33,000	16,000	20,000		33,600	16,000	20,000

Balance Sheet as on April 01, 2012 after A’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Machinery (18,000 – 7,000)	11,000
B	24,000		Furniture (18,000 + 3,000)	21,000
C	16,000		Investments	9,000
A	20,000	60,000	Stock (6,000 – 1,000)	5,000
Creditors		7,000	Debtors	4,000
Bills Payable		2,500	Cash	19,500
		69,500		69,500

Working Notes

WN1: Calculation of New Profit Sharing Ratio

Let the Combined share of profit of all partners after A’s admission be = 1

WN2: Calculation of Proportionate Capital

WN3: Calculation of Cash Balance

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	2,000	B’s Capital	9,600
A’s Capital	20,000
Premium for Goodwill	3,500	Balance c/d	19,500
C’s Capital	3,600
	29,100		29,100

Answer:

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Machinery (94,000 × 15%)	14,100	Stock (48,000 – 44,000)	4,000
Outstanding Rent	1,900	Creditors	12,000
	16,000		16,000

Partners’ Capital Accounts
Dr.									Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D
Goodwill	4,000	6,000	10,000		Balance b/d	36,000	44,000	52,000
					General Reserve	2,800	4,200	7,000
					Premium for Goodwill	1,200	1,800	3,000
Balance c/d	36,000	44,000	52,000
	40,000	50,000	62,000			40,000	50,000	62,000
					Balance c/d	36,000	44,000	52,000
					Cash				88,000
Balance c/d	36,000	44,000	52,000	88,000
	36,000	44,000	52,000	88,000		36,000	44,000	52,000	88,000

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	18,000
D’s Capital A/c	88,000
Premium for Goodwill	6,000	Balance c/d	1,12,000
	1,12,000		1,12,000

Balance Sheet as on March 31, 2012 after D’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Cash	1,12,000
A	36,000		Bills Receivable	14,000
B	44,000		Stock	48,000
C	52,000		Debtors	42,000
D	88,000	2,20,000	Machinery (94,000 – 14,100)	79,900
Creditors (64,000 – 12,000)		52,000
Bills Payable		22,000
Outstanding Rent		1,900
		2,95,900		2,95,900

Working Notes

WN1

WN2

Distribution of General Reserve

WN3

Writing-off of Goodwill

WN4

Calculation of C’s share of Goodwill

Let combined share of all partners after D’s admission be = 1

Combined Capital of A, B and C after all adjustments = 36,000 + 44,000 + 52,000 = Rs 1,32,000

The Values involved are:
(i) Responsibility towards society,
(ii) Upliftment of education sector.

Question 97:

Revaluation Account
Dr.				Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Machinery (94,000 × 15%)	14,100	Stock (48,000 – 44,000)	4,000
Outstanding Rent	1,900	Creditors	12,000
	16,000		16,000

Partners’ Capital Accounts
Dr.									Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D
Goodwill	4,000	6,000	10,000		Balance b/d	36,000	44,000	52,000
					General Reserve	2,800	4,200	7,000
					Premium for Goodwill	1,200	1,800	3,000
Balance c/d	36,000	44,000	52,000
	40,000	50,000	62,000			40,000	50,000	62,000
					Balance c/d	36,000	44,000	52,000
					Cash				88,000
Balance c/d	36,000	44,000	52,000	88,000
	36,000	44,000	52,000	88,000		36,000	44,000	52,000	88,000

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	18,000
D’s Capital A/c	88,000
Premium for Goodwill	6,000	Balance c/d	1,12,000
	1,12,000		1,12,000

Balance Sheet as on March 31, 2012 after D’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Capital A/cs:			Cash	1,12,000
A	36,000		Bills Receivable	14,000
B	44,000		Stock	48,000
C	52,000		Debtors	42,000
D	88,000	2,20,000	Machinery (94,000 – 14,100)	79,900
Creditors (64,000 – 12,000)		52,000
Bills Payable		22,000
Outstanding Rent		1,900
		2,95,900		2,95,900

Working Notes

WN1

WN2

Distribution of General Reserve

WN3

Writing-off of Goodwill

WN4

Calculation of C’s share of Goodwill

Let combined share of all partners after D’s admission be = 1

Combined Capital of A, B and C after all adjustments = 36,000 + 44,000 + 52,000 = Rs 1,32,000

The Values involved are:
(i) Responsibility towards society,
(ii) Upliftment of education sector.

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Machinery (30,000 × 10%)	3,000	Building (50,000 × 20%)	10,000
Stock (35,000 × 25/125)	7,000	Loss transferred to Capital A/cs:
Repair for Furniture	600	X	375
		Y	225
	10,600		10,600

Partners’ Capital Account
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation	375	225		Balance b/d	75,000	60,000
				General Reserve	12,500	7,500
				Bank			50,000
Balance c/d	97,125	73,275	50,000	Premium for Goodwill	10,000	6,000
	97,500	73,500	50,000		97,500	73,500	50,000
				Balance b/d	97,125	73,275	50,000
Balance c/d	1,25,000	75,000	50,000	X’s Current	27,875	1,725
(Proportionate)				Y’s Current
	1,25,000	75,000	50,000		1,25,000	75,000	50,000

Balance Sheet as on March 31, 2012 after Z’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Creditors		25,000	Cash at Bank	77,200
			Bills Receivables	12,800
Repair for Furniture		600	Debtors	20,000
Capital A/cs:			Stock (35,000 – 7,000)	28,000
X	1,25,000		Furniture	21,000
Y	75,000		Machinery (30,000 – 3,000)	27,000
Z	50,000	2,50,000	Buildings (50,000 + 10,000)	60,000
			X’s Current A/c	27,875
			Y’s Current A/c	1,725
		2,75,600		2,75,600

â€‹

NOTE: As the per the textbook, the total of the Balance Sheet is Rs 2,75,000, which should be Rs 2,75,600 in order to record the liability of Rs 600 for repairs in the books.

Working Notes

WN1: Sacrificing Ratio

WN2: Distribution on Revaluation Profit

WN3: Distribution of General Reserve

WN4: Distribution of Premium for Goodwill

WN5: Calculation of Proportionate Capital

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	11,200
Z’s Capital	50,000
Premium for Goodwill	16,000
		Balance c/d	77,200
	77,200		77,200

Question 98:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Machinery (30,000 × 10%)	3,000	Building (50,000 × 20%)	10,000
Stock (35,000 × 25/125)	7,000	Loss transferred to Capital A/cs:
Repair for Furniture	600	X	375
		Y	225
	10,600		10,600

Partners’ Capital Account
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation	375	225		Balance b/d	75,000	60,000
				General Reserve	12,500	7,500
				Bank			50,000
Balance c/d	97,125	73,275	50,000	Premium for Goodwill	10,000	6,000
	97,500	73,500	50,000		97,500	73,500	50,000
				Balance b/d	97,125	73,275	50,000
Balance c/d	1,25,000	75,000	50,000	X’s Current	27,875	1,725
(Proportionate)				Y’s Current
	1,25,000	75,000	50,000		1,25,000	75,000	50,000

Balance Sheet as on March 31, 2012 after Z’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Creditors		25,000	Cash at Bank	77,200
			Bills Receivables	12,800
Repair for Furniture		600	Debtors	20,000
Capital A/cs:			Stock (35,000 – 7,000)	28,000
X	1,25,000		Furniture	21,000
Y	75,000		Machinery (30,000 – 3,000)	27,000
Z	50,000	2,50,000	Buildings (50,000 + 10,000)	60,000
			X’s Current A/c	27,875
			Y’s Current A/c	1,725
		2,75,600		2,75,600

â€‹

NOTE: As the per the textbook, the total of the Balance Sheet is Rs 2,75,000, which should be Rs 2,75,600 in order to record the liability of Rs 600 for repairs in the books.

Working Notes

WN1: Sacrificing Ratio

WN2: Distribution on Revaluation Profit

WN3: Distribution of General Reserve

WN4: Distribution of Premium for Goodwill

WN5: Calculation of Proportionate Capital

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	11,200
Z’s Capital	50,000
Premium for Goodwill	16,000
		Balance c/d	77,200
	77,200		77,200

Answer:

Partner’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	3,00,000	3,00,000
				Bank			2,00,000
				Premium for Goodwill	16,000	4,000
Balance c/d	3,16,000	3,04,000	2,00,000
	3,16,000	3,04,000	2,00,000		3,16,000	3,04,000	2,00,000
Bank	1,16,000	1,04,000		Balance b/d	3,16,000	3,04,000	2,00,000
Balance c/d	2,00,000	2,00,000	2,00,000
Proportionate
	3,16,000	3,04,000	2,00,000		3,16,000	3,04,000	2,00,000

Balance Sheet as on April 01, 2012 after C’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Sundry Creditors		60,000	Cash at Bank	40,000
Outstanding Expenses		15,000	Sundry Debtors	36,000
Capital A/cs:			Stock	84,000
A	2,00,000		Furniture and Fittings	65,000
B	2,00,000		Plant and Machinery	4,50,000
C	2,00,000	6,00,000
		6,75,000		6,75,000

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Cash	40,000	A’s Capital	1,16,000
C’s Capital	2,00,000	B’s Capital	1,04,000
Premium for Goodwill	20,000
		Balance c/d	40,000
	2,60,000		2,60,000

Calculation of Goodwill

Goodwill = Super Profit × Number of Years Purchases

= 30,000 × 2 = Rs 60,000

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Premium for Goodwill	Dr.		20,000
To A’s Capital A/C	Dr.			16,000
To B’s Capital A/c				4,000
(Premium for Goodwill distributed between A and B in their sacrificing ratio i.e. 4:1)

Calculation of Proportionate Capital

Capital of the firm is Rs 6,00,000

The Values involved are:
(i) Fulfilling responsibilities towards society
(ii) Environment Protection.

Question 99:

Partner’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	3,00,000	3,00,000
				Bank			2,00,000
				Premium for Goodwill	16,000	4,000
Balance c/d	3,16,000	3,04,000	2,00,000
	3,16,000	3,04,000	2,00,000		3,16,000	3,04,000	2,00,000
Bank	1,16,000	1,04,000		Balance b/d	3,16,000	3,04,000	2,00,000
Balance c/d	2,00,000	2,00,000	2,00,000
Proportionate
	3,16,000	3,04,000	2,00,000		3,16,000	3,04,000	2,00,000

Balance Sheet as on April 01, 2012 after C’s admission
Liabilities		Amount Rs	Assets	Amount Rs

Sundry Creditors		60,000	Cash at Bank	40,000
Outstanding Expenses		15,000	Sundry Debtors	36,000
Capital A/cs:			Stock	84,000
A	2,00,000		Furniture and Fittings	65,000
B	2,00,000		Plant and Machinery	4,50,000
C	2,00,000	6,00,000
		6,75,000		6,75,000

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Cash	40,000	A’s Capital	1,16,000
C’s Capital	2,00,000	B’s Capital	1,04,000
Premium for Goodwill	20,000
		Balance c/d	40,000
	2,60,000		2,60,000

Calculation of Goodwill

Goodwill = Super Profit × Number of Years Purchases

= 30,000 × 2 = Rs 60,000

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Premium for Goodwill	Dr.		20,000
To A’s Capital A/C	Dr.			16,000
To B’s Capital A/c				4,000
(Premium for Goodwill distributed between A and B in their sacrificing ratio i.e. 4:1)

Calculation of Proportionate Capital

Capital of the firm is Rs 6,00,000

The Values involved are:
(i) Fulfilling responsibilities towards society
(ii) Environment Protection.

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Stock (50,000 – 45,000)	5,000
Furniture (10,000 × 10%)	1,000	Loss transferred to
Machinery (1,20,000 ×5%)	6,000	Ram Capital	9,000
Provision for Doubtful Debts	3,000	Mohan Capital	6,000

	15,000		15,000

Partners’ Capital Accounts
Dr.					Cr.
Particulars	Ram	Mohan	Sohan	Particulars		Ram	Mohan	Sohan
Revaluation	9,000	6,000		Balance b/d		1,35,000	1,25,000
				Reserves		18,000	12,000
				Premium for Goodwill		18,000	12,000
Balance c/d	1,62,000	1,43,000
	1,71,000	1,49,000				1,71,000	1,49,000
				Balance b/d		1,62,000	1,43,000
Balance c/d	1,62,000	1,43,000	1,52,500	Cash				1,52,500
	1,62,000	1,43,000	1,52,500			1,62,000	1,43,000	1,52,500

Balance Sheet as on March 31, 2008 after Sohan’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		30,000	Cash (1,00,000 + 1,52,500 + 30,000)		2,82,500
Bills Payable		10,000	Stock		45,000
Capital A/cs:			10% Government Bonds		20,000
Ram	1,62,000		Furniture (10,000 – 1,000)		9,000
Mohan	1,43,000		Machinery (1,20,000 – 6,000)		1,14,000
Sohan	1,52,500	4,57,500	Debtors	30,000
			Less Provision for D. Debts	3,000	27,000
		4,97,500			4,97,500

Working Notes

WN1

WN2 Distribution Revaluation Loss

WN3 Distribution of Premium for Goodwill

WN4 Distribution of General Reserve

WN5 Calculation of Sohan’s share of Capital

Let the combined share of all partners after Sohan’s admission be = 1

Combined Capital of Ram and Mohan after Sohan’s admission = 1,62,000 + 1,43,000 = Rs 3,05,000

Total capital of the firm after Sohan’s admission

Question 100:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Stock (50,000 – 45,000)	5,000
Furniture (10,000 × 10%)	1,000	Loss transferred to
Machinery (1,20,000 ×5%)	6,000	Ram Capital	9,000
Provision for Doubtful Debts	3,000	Mohan Capital	6,000

	15,000		15,000

Partners’ Capital Accounts
Dr.					Cr.
Particulars	Ram	Mohan	Sohan	Particulars		Ram	Mohan	Sohan
Revaluation	9,000	6,000		Balance b/d		1,35,000	1,25,000
				Reserves		18,000	12,000
				Premium for Goodwill		18,000	12,000
Balance c/d	1,62,000	1,43,000
	1,71,000	1,49,000				1,71,000	1,49,000
				Balance b/d		1,62,000	1,43,000
Balance c/d	1,62,000	1,43,000	1,52,500	Cash				1,52,500
	1,62,000	1,43,000	1,52,500			1,62,000	1,43,000	1,52,500

Balance Sheet as on March 31, 2008 after Sohan’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		30,000	Cash (1,00,000 + 1,52,500 + 30,000)		2,82,500
Bills Payable		10,000	Stock		45,000
Capital A/cs:			10% Government Bonds		20,000
Ram	1,62,000		Furniture (10,000 – 1,000)		9,000
Mohan	1,43,000		Machinery (1,20,000 – 6,000)		1,14,000
Sohan	1,52,500	4,57,500	Debtors	30,000
			Less Provision for D. Debts	3,000	27,000
		4,97,500			4,97,500

Working Notes

WN1

WN2 Distribution Revaluation Loss

WN3 Distribution of Premium for Goodwill

WN4 Distribution of General Reserve

WN5 Calculation of Sohan’s share of Capital

Let the combined share of all partners after Sohan’s admission be = 1

Combined Capital of Ram and Mohan after Sohan’s admission = 1,62,000 + 1,43,000 = Rs 3,05,000

Total capital of the firm after Sohan’s admission

Answer:

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Profit on Revaluation transferred to-			Building	19,600
Raghu’s Capital A/c	22,440		Provision for Doubtful Debts (Old)	7,000
Rishu’s Capital A/c	14,960	37,400	Liability for Creditors	10,800
		37,400		37,400

Partners’ Capital Account
Dr.							Cr.
Particulars	Raghu	Rishu	Rishabh	Particulars	Raghu	Rishu	Rishabh
				Balance b/d	1,19,000	1,12,000
Cash A/c (Bal. Fig.)	48,040	84,860		Cash A/c			50,000
Balance c/d	1,00,000	50,000	50,000	Investment Fluctuation Fund	2,400	1,600
				Premium for Goodwill	4,200	6,300
				Revaluation A/c (Profit)	22,440	14,960

	1,48,040	1,34,860	50,000		1,48,040	1,34,860	50,000

Balance Sheet as on March 31, 2009
Liabilities		Amount Rs	Assets	Amount Rs
Creditors	86,000		Cash (*WN4*)	4,600
Less: Liability	(10,800)	75,200	Debtors	42,000
Employees Provident Fund		10,000	Investments	21,000
Capital A/cs:			Buildings (98,000 + 19,600)	1,17,600
Raghu	1,00,000		Plant and Machinery	1,00,000
Rishu	50,000
Rishabh	50,000	2,00,000

		2,85,200		2,85,200

Working Notes:

WN 1Calculation of Sacrificing Ratio

Old Ratio = 3 : 2

New Ratio = 2 : 1 : 1

Sacrificing Ratio = Old ratio – New Ratio

WN 2Share of Rishabh’s Share of Goodwill

Value of Firm’s Goodwill = 42,000

WN 3Adjustment of Capital

Total Capital of New Firm = Rishabh’s Capital × Reciprocal of Rishabh’s Share

Capital of Rishabh = Rs 50,000

WN 4 Cash Account

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	77,000	Raghu’s Capital	48,040
Rishabh’s Capital	50,000	Rishu’s Capital	84,860
Premium for Goodwill	10,500	Balance c/d	4,600
	1,37,500		1,37,500

Question 1:

Revaluation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Profit on Revaluation transferred to-			Building	19,600
Raghu’s Capital A/c	22,440		Provision for Doubtful Debts (Old)	7,000
Rishu’s Capital A/c	14,960	37,400	Liability for Creditors	10,800
		37,400		37,400

Partners’ Capital Account
Dr.							Cr.
Particulars	Raghu	Rishu	Rishabh	Particulars	Raghu	Rishu	Rishabh
				Balance b/d	1,19,000	1,12,000
Cash A/c (Bal. Fig.)	48,040	84,860		Cash A/c			50,000
Balance c/d	1,00,000	50,000	50,000	Investment Fluctuation Fund	2,400	1,600
				Premium for Goodwill	4,200	6,300
				Revaluation A/c (Profit)	22,440	14,960

	1,48,040	1,34,860	50,000		1,48,040	1,34,860	50,000

Balance Sheet as on March 31, 2009
Liabilities		Amount Rs	Assets	Amount Rs
Creditors	86,000		Cash (*WN4*)	4,600
Less: Liability	(10,800)	75,200	Debtors	42,000
Employees Provident Fund		10,000	Investments	21,000
Capital A/cs:			Buildings (98,000 + 19,600)	1,17,600
Raghu	1,00,000		Plant and Machinery	1,00,000
Rishu	50,000
Rishabh	50,000	2,00,000

		2,85,200		2,85,200

Working Notes:

WN 1Calculation of Sacrificing Ratio

Old Ratio = 3 : 2

New Ratio = 2 : 1 : 1

Sacrificing Ratio = Old ratio – New Ratio

WN 2Share of Rishabh’s Share of Goodwill

Value of Firm’s Goodwill = 42,000

WN 3Adjustment of Capital

Total Capital of New Firm = Rishabh’s Capital × Reciprocal of Rishabh’s Share

Capital of Rishabh = Rs 50,000

WN 4 Cash Account

Cash Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Balance b/d	77,000	Raghu’s Capital	48,040
Rishabh’s Capital	50,000	Rishu’s Capital	84,860
Premium for Goodwill	10,500	Balance c/d	4,600
	1,37,500		1,37,500

Answer:

A is admitted for 1/5 share of profit

Let the combined share of profit for all partners after A’s admission be = 1

Combined share of X, Y and Z after A’s admission =1 − A’s share

New Ratio = Old Ratio × Combined share of X, Y and Z

Question 2:

A is admitted for 1/5 share of profit

Let the combined share of profit for all partners after A’s admission be = 1

Combined share of X, Y and Z after A’s admission =1 − A’s share

New Ratio = Old Ratio × Combined share of X, Y and Z

Answer:

Ashok admits for share of profit

Ravi sacrifices in favour of Ashok =

Mukesh sacrifices in favour of Ashok =

New Ratio = Old Ratio − Sacrificing Ratio

Question 3:

Ashok admits for share of profit

Ravi sacrifices in favour of Ashok =

Mukesh sacrifices in favour of Ashok =

New Ratio = Old Ratio − Sacrificing Ratio

Answer:

C admits for share

A sacrifices in favour of C

B sacrifices in favour of C

New Ratio = Old Ratio − Sacrificing Ratio

Question 4:

C admits for share

A sacrifices in favour of C

B sacrifices in favour of C

New Ratio = Old Ratio − Sacrificing Ratio

Answer:

C admits for 1/6 share of profit

A sacrifices his share of profit in favour of C

B sacrifices his share of profit in favour of C

New Ratio = Old Ratio − Sacrificing Ratio

Question 5:

C admits for 1/6 share of profit

A sacrifices his share of profit in favour of C

B sacrifices his share of profit in favour of C

New Ratio = Old Ratio − Sacrificing Ratio

Answer:

Old Profit Sharing Ratio amongst Partners (X and Y) is 3 : 2
Z is admitted for 1/4^th Share in Profits
Sacrificing Ratio of X and Y is 2 : 1

Question 6:

Old Profit Sharing Ratio amongst Partners (X and Y) is 3 : 2
Z is admitted for 1/4^th Share in Profits
Sacrificing Ratio of X and Y is 2 : 1

Answer:

Sacrificing Ratio = Old Ratio × Surrender Ratio

New Ratio = Old Ratio − Sacrificing Ratio

P’s share = X’s Sacrifiece

Q’s share = Y’s Sacrifice

Question 7:

Sacrificing Ratio = Old Ratio × Surrender Ratio

New Ratio = Old Ratio − Sacrificing Ratio

P’s share = X’s Sacrifiece

Q’s share = Y’s Sacrifice

Answer:

Sacrificing Ratio = Old Ratio × Surrender Ratio

New Ratio = Old Ratio − Sacrificing Ratio

∴New Profit Sharing Ratio = 75 : 48 : 37

Question 8:

Sacrificing Ratio = Old Ratio × Surrender Ratio

New Ratio = Old Ratio − Sacrificing Ratio

∴New Profit Sharing Ratio = 75 : 48 : 37

Answer:

L sacrifices in favour of N

M sacrifices in favour of N

Question 9:

L sacrifices in favour of N

M sacrifices in favour of N

Answer:

_(i)

S’s Share = R’s Sacrifice + S’s Sacrifice

(ii)

C admits for 1/4^th share of profit

Let the combined share of A, B and C be = 1

Combined share of A and B

New Ratio = Combined share of A and B

(iii)

C admits for share of profit

New Ratio = Old Ratio − Sacrificing Ratio

(iv)

W admits for share of profit

Let combined share of all partner after W’s admission be = 1

Combined share X and Y in the new firm

New Ratio = Old Ratio × Combined share of X and Y

(v)

C admits for share

D admits for share

Let combined share of all partner after C and D’s admission be = 1

Combined share of profit of A and B after C and D’s admission

New Ratio = Old Ratio × Combined share of A and B

(vi)

C admits for share of profit

Let the combined share of all partners after C’s admission be = 1

Combined share of A and B after C’s admission

Question 10:

_(i)

S’s Share = R’s Sacrifice + S’s Sacrifice

(ii)

C admits for 1/4^th share of profit

Let the combined share of A, B and C be = 1

Combined share of A and B

New Ratio = Combined share of A and B

(iii)

C admits for share of profit

New Ratio = Old Ratio − Sacrificing Ratio

(iv)

W admits for share of profit

Let combined share of all partner after W’s admission be = 1

Combined share X and Y in the new firm

New Ratio = Old Ratio × Combined share of X and Y

(v)

C admits for share

D admits for share

Let combined share of all partner after C and D’s admission be = 1

Combined share of profit of A and B after C and D’s admission

New Ratio = Old Ratio × Combined share of A and B

(vi)

C admits for share of profit

Let the combined share of all partners after C’s admission be = 1

Combined share of A and B after C’s admission

Answer:

Sacrificing Ratio = Old Ratio − Sacrificing Ratio

Question 11:

Sacrificing Ratio = Old Ratio − Sacrificing Ratio

Answer:

Sacrificing Share = Old Ratio − New Ratio

Question 12:

Sacrificing Share = Old Ratio − New Ratio

Answer:

D is admitted for share of profit

Let the combined share of profit of A, B C and D be = 1

Combined share of A, B and C after D’s admission = 1 − D’s shares

New Ratio = Old Ratio × combined share of A, B and C

Sacrificing Ratio = Old Ratio − New Ratio

Question 13:

D is admitted for share of profit

Let the combined share of profit of A, B C and D be = 1

Combined share of A, B and C after D’s admission = 1 − D’s shares

New Ratio = Old Ratio × combined share of A, B and C

Sacrificing Ratio = Old Ratio − New Ratio

Answer:

Sacrificing Share = Old Ratio − New Ratio

Question 14:

Sacrificing Share = Old Ratio − New Ratio

Answer:

E is admitted for share

Let combined share of profit of all partners after E’s admission = 1

Combined share of A, B, C and D after E’s admission = 1 − E’s Share

New Ratio = Combined of A, B, C and D × Agreed Share of A, B, C and D

Question 15:

E is admitted for share

Let combined share of profit of all partners after E’s admission = 1

Combined share of A, B, C and D after E’s admission = 1 − E’s Share

New Ratio = Combined of A, B, C and D × Agreed Share of A, B, C and D

Answer:

C’s admitted for share of profit

Let the combined share of profit of all partners be = 1

Combined share of A and B after C’s admission = 1 − C’s share

New Ratio = Old Ratio × Combined share of A and B

Profit sharing ratio after C’s admission will become old ratio to determine the ratio after D’s admission

D is admitted for share of profit

Let combined share of all partners after D’s admission = 1

Combined share of A, B and C after D’s admission = 1 − D’s share

New Ratio = Old Ratio × Combined share of A, B, and C

Question 16:

C’s admitted for share of profit

Let the combined share of profit of all partners be = 1

Combined share of A and B after C’s admission = 1 − C’s share

New Ratio = Old Ratio × Combined share of A and B

Profit sharing ratio after C’s admission will become old ratio to determine the ratio after D’s admission

D is admitted for share of profit

Let combined share of all partners after D’s admission = 1

Combined share of A, B and C after D’s admission = 1 − D’s share

New Ratio = Old Ratio × Combined share of A, B, and C

Answer:

Sacrificing Ratio = Old Ratio × Surrender Ratio

New Ratio = Old Ratio − Sacrificing Ratio

Z’s share = X’s Sacrifice + Y’s Sacrifice

Question 17:

Sacrificing Ratio = Old Ratio × Surrender Ratio

New Ratio = Old Ratio − Sacrificing Ratio

Z’s share = X’s Sacrifice + Y’s Sacrifice

Answer:

Journal Entry
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	A’s Capital A/c	Dr.		10,000
	B’s Capital A/c	Dr.		5,000
	To Goodwill A/c				15,000
	(Goodwill written-off between A and B in the old ratio of 2:1)

Note- Goodwill brought in by C is not recorded in the books of the firm as the amount for goodwill is privately paid to A and B.

Working Note: Goodwill Written-off

Question 18:

Journal Entry
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	A’s Capital A/c	Dr.		10,000
	B’s Capital A/c	Dr.		5,000
	To Goodwill A/c				15,000
	(Goodwill written-off between A and B in the old ratio of 2:1)

Note- Goodwill brought in by C is not recorded in the books of the firm as the amount for goodwill is privately paid to A and B.

Working Note: Goodwill Written-off

Answer:

C is admitted for share

Let the combined share of A, B and C be = 1

Combined share of A and B after C’s admission = 1 − C’s share

New Ratio = Old Ratio × Combined share of A and B

Distribution of C’s share of Goodwill

C’s share of Goodwill = Rs 14,000

Question 19:

C is admitted for share

Let the combined share of A, B and C be = 1

Combined share of A and B after C’s admission = 1 − C’s share

New Ratio = Old Ratio × Combined share of A and B

Distribution of C’s share of Goodwill

C’s share of Goodwill = Rs 14,000

Answer:

Journal Entries
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	A’s Capital A/c	Dr.		1,800
	B’s Capital A/c	Dr.		1,200
	To Goodwill A/c				3,000
	(Goodwill written-off)

	Cash A/c	Dr.		40,000
	To C’s Capital A/c	Dr.			30,000
	To Premium for Goodwill A/c				10,000
	(C brought capital and his share of goodwill in cash)

	Premium for Goodwill	Dr.		10,000
	To A’s Capital A/c				5,000
	To B’s Capital A/c				5,000
	(Premium for Goodwill distributed)

Sacrificing Ratio = Old Ratio − New Ratio

Distribution of Premium for Goodwill C’s share of Goodwill)

Goodwill written-off

Question 20:

Journal Entries
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	A’s Capital A/c	Dr.		1,800
	B’s Capital A/c	Dr.		1,200
	To Goodwill A/c				3,000
	(Goodwill written-off)

	Cash A/c	Dr.		40,000
	To C’s Capital A/c	Dr.			30,000
	To Premium for Goodwill A/c				10,000
	(C brought capital and his share of goodwill in cash)

	Premium for Goodwill	Dr.		10,000
	To A’s Capital A/c				5,000
	To B’s Capital A/c				5,000
	(Premium for Goodwill distributed)

Sacrificing Ratio = Old Ratio − New Ratio

Distribution of Premium for Goodwill C’s share of Goodwill)

Goodwill written-off

Answer:

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		21,000
	To Premium for Goodwill A/c				21,000
	(C brought Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		21,000
	To A’s Capital A/c				9,000
	To B’s Capital A/c				12,000
	(Premium for Goodwill brought by C distributed between A and B in sacrificing ratio i.e. 3:4)

C’s share = A’s sacrifice + B’s sacrifice

New Ratio is 12:6:7

C’s will bring Premium for Goodwill

Distribution of Premium for Goodwill-

Question 21:

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		21,000
	To Premium for Goodwill A/c				21,000
	(C brought Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		21,000
	To A’s Capital A/c				9,000
	To B’s Capital A/c				12,000
	(Premium for Goodwill brought by C distributed between A and B in sacrificing ratio i.e. 3:4)

C’s share = A’s sacrifice + B’s sacrifice

New Ratio is 12:6:7

C’s will bring Premium for Goodwill

Distribution of Premium for Goodwill-

Answer:

(a)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		2,000
	To Premium for Goodwill A/c				2,000
	(D brought Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		2,000
	To B’s Capital A/c				1,200
	To C’s Capital A/c				800
	(Premium for Goodwill distributed between B and C in sacrificing ratio i.e. 3:2)

Working Note:

Distribution of premium for Goodwill-

(b)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		2,100
	To Premium for Goodwill A/c				2,100
	(D brought his share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		2,100
	To B’s Capital A/c				1,400
	To C’s Capital A/c				700
	(Premium for Goodwill brought distributed between B and C in sacrificing Ratio i.e. 2:1)

Working Note:

WN1

WN2

Distribution of Premium for Goodwill-

Question 22:

(a)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		2,000
	To Premium for Goodwill A/c				2,000
	(D brought Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		2,000
	To B’s Capital A/c				1,200
	To C’s Capital A/c				800
	(Premium for Goodwill distributed between B and C in sacrificing ratio i.e. 3:2)

Working Note:

Distribution of premium for Goodwill-

(b)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		2,100
	To Premium for Goodwill A/c				2,100
	(D brought his share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		2,100
	To B’s Capital A/c				1,400
	To C’s Capital A/c				700
	(Premium for Goodwill brought distributed between B and C in sacrificing Ratio i.e. 2:1)

Working Note:

WN1

WN2

Distribution of Premium for Goodwill-

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	A’s Capital A/c	Dr.		600
	B’s Capital A/c	Dr.		400
	To Goodwill A/c				1,000
	(Goodwill written-off)

	Cash A/c	Dr.		1,000
	To Premium for Goodwill A/c				1,000
	(C brought his share of Goodwill in cash)

	Premium for Goodwill	Dr.		1,000
	To A’s Capital A/c				900
	To B’s Capital A/c				100
	(Premium for Goodwill distributed)

Working Note:

WN1

Calculating of sacrificing Ratio

WN2

Distribution of Premium for Goodwill-

WN3

Writing-off of Goodwill in the books (in old ratio)

Question 23:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	A’s Capital A/c	Dr.		600
	B’s Capital A/c	Dr.		400
	To Goodwill A/c				1,000
	(Goodwill written-off)

	Cash A/c	Dr.		1,000
	To Premium for Goodwill A/c				1,000
	(C brought his share of Goodwill in cash)

	Premium for Goodwill	Dr.		1,000
	To A’s Capital A/c				900
	To B’s Capital A/c				100
	(Premium for Goodwill distributed)

Working Note:

WN1

Calculating of sacrificing Ratio

WN2

Distribution of Premium for Goodwill-

WN3

Writing-off of Goodwill in the books (in old ratio)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		15,000
	To Premium for Goodwill A/c				15,000
	(D brought his share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		15,000
	To B’s Capital A/c				15,000
	(Premium for goodwill transferred to B’s Capital)

	C’s Capital A/c	Dr.		3,750
	To B’s Capital A/c				3,750
	(Goodwill charged from C’s Capital Account due to his gain in profit sharing)

WN1

Calculation of Sacrificing Ratio:

Let combined share of all partners after D’s admission be = 1

B and C each share of profit after D’s admission will be

WN2

C is gaining in new the firm. Hence, C’s gain in goodwill will be debited to his capital and given to B (sacrificing partner).

Question 24:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		15,000
	To Premium for Goodwill A/c				15,000
	(D brought his share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		15,000
	To B’s Capital A/c				15,000
	(Premium for goodwill transferred to B’s Capital)

	C’s Capital A/c	Dr.		3,750
	To B’s Capital A/c				3,750
	(Goodwill charged from C’s Capital Account due to his gain in profit sharing)

WN1

Calculation of Sacrificing Ratio:

Let combined share of all partners after D’s admission be = 1

B and C each share of profit after D’s admission will be

WN2

C is gaining in new the firm. Hence, C’s gain in goodwill will be debited to his capital and given to B (sacrificing partner).

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	A’s Capital A/c	Dr.		3,000
	B’s Capital A/c	Dr.		3,000
	To Goodwill A/c				6,000
	(Goodwill written-off)

	Cash A/c	Dr.		1,000
	To Premium for Goodwill A/c				1,000
	(C brought Rs 1,000 in cash of out of his share of goodwill Rs 1,800)

	Premium for Goodwill A/c	Dr.		1,000
	C’s Capital A/c	Dr.		800
	To A’s Capital A/c				900
	To B’s Capital A/c				900
	(C’s share of goodwill distributed between A and B in their sacrificing ratio i.e.1:1)

Working Notes:

WN1: Writing-off of Goodwill

A and B each accounts will be debited by =

WN2: Distribution of C’s share of Goodwill

Question 25:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	A’s Capital A/c	Dr.		3,000
	B’s Capital A/c	Dr.		3,000
	To Goodwill A/c				6,000
	(Goodwill written-off)

	Cash A/c	Dr.		1,000
	To Premium for Goodwill A/c				1,000
	(C brought Rs 1,000 in cash of out of his share of goodwill Rs 1,800)

	Premium for Goodwill A/c	Dr.		1,000
	C’s Capital A/c	Dr.		800
	To A’s Capital A/c				900
	To B’s Capital A/c				900
	(C’s share of goodwill distributed between A and B in their sacrificing ratio i.e.1:1)

Working Notes:

WN1: Writing-off of Goodwill

A and B each accounts will be debited by =

WN2: Distribution of C’s share of Goodwill

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		25,000
	To Premium for Goodwill A/c				25,000
	(C brought his share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		25,000
	To M’s Capital A/c				12,500
	To J’s Capital A/c				12,500
	(C’s share of Goodwill distributed in M and J in their sacrificing Ratio)

Working Notes:

WN1

Calculating of Sacrificing Ratio

WN2

Distribution of R’s share of Goodwill-

Question 26:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		25,000
	To Premium for Goodwill A/c				25,000
	(C brought his share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		25,000
	To M’s Capital A/c				12,500
	To J’s Capital A/c				12,500
	(C’s share of Goodwill distributed in M and J in their sacrificing Ratio)

Working Notes:

WN1

Calculating of Sacrificing Ratio

WN2

Distribution of R’s share of Goodwill-

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		52,000
	To C’s Capital A/c				40,000
	To Premium for Goodwill A/c				12,000
	(C brought Capital and his share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		12,000
	To A’s Capital A/c				6,000
	To B’s Capital A/c				6,000
	(C’s share of Goodwill distributed in A and B)

Working Notes-

WN1

WN2

Calculation of new profit sharing Ratio

_WN3

Distribution of C’s share of Goodwill (in Sacrificing Ratio)

Question 27:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		52,000
	To C’s Capital A/c				40,000
	To Premium for Goodwill A/c				12,000
	(C brought Capital and his share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		12,000
	To A’s Capital A/c				6,000
	To B’s Capital A/c				6,000
	(C’s share of Goodwill distributed in A and B)

Working Notes-

WN1

WN2

Calculation of new profit sharing Ratio

_WN3

Distribution of C’s share of Goodwill (in Sacrificing Ratio)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		13,600
	To C’s Capital A/c				10,000
	To Premium for Goodwill A/c				3,600
	(C brought capital and his share of goodwill)

	Premium for Goodwill A/c	Dr.		3,600
	To A’s Capital A/c				900
	To B’s Capital A/c				2,700
	(C’s share of goodwill transferred to A and B in their sacrificing ratio i.e. 3:1)

	Profit and Loss Appropriation A/c	Dr.		24,000
	To A’s Capital A/c				13,000
	To B’s Capital A/c				7,000
	To C’s Capital A/c				4,000
	(Profit after C’s admission distributed)

Working Note:

WN1

WN2

Distribution of C’s share of Goodwill (in sacrificing ratio)

WN3

Calculation of New Profit Sharing Ratio

WN4

Distribution of Profit earned after C’s admission (in new ratio)

Question 28:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		13,600
	To C’s Capital A/c				10,000
	To Premium for Goodwill A/c				3,600
	(C brought capital and his share of goodwill)

	Premium for Goodwill A/c	Dr.		3,600
	To A’s Capital A/c				900
	To B’s Capital A/c				2,700
	(C’s share of goodwill transferred to A and B in their sacrificing ratio i.e. 3:1)

	Profit and Loss Appropriation A/c	Dr.		24,000
	To A’s Capital A/c				13,000
	To B’s Capital A/c				7,000
	To C’s Capital A/c				4,000
	(Profit after C’s admission distributed)

Working Note:

WN1

WN2

Distribution of C’s share of Goodwill (in sacrificing ratio)

WN3

Calculation of New Profit Sharing Ratio

WN4

Distribution of Profit earned after C’s admission (in new ratio)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		30,000
	To Premium for Goodwill A/c				30,000
	(X brought his share of goodwill)

	Premium for Goodwill A/c	Dr.		30,000
	Y’s Capital A/c	Dr.		7,500
	To X’s Capital A/c				37,500
	(Y and Z share of gain in goodwill transferred to X’s Capital Account)

Working Notes:

WN1

Calculation of Sacrificing Ratio

WN2

Goodwill of the firm on the basis of Z’s share

X will get as a goodwill = Z’s share of Goodwill + Y’s gain in Goodwill

= 30,000 + 7,500

= Rs 37,500

Question 29:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		30,000
	To Premium for Goodwill A/c				30,000
	(X brought his share of goodwill)

	Premium for Goodwill A/c	Dr.		30,000
	Y’s Capital A/c	Dr.		7,500
	To X’s Capital A/c				37,500
	(Y and Z share of gain in goodwill transferred to X’s Capital Account)

Working Notes:

WN1

Calculation of Sacrificing Ratio

WN2

Goodwill of the firm on the basis of Z’s share

X will get as a goodwill = Z’s share of Goodwill + Y’s gain in Goodwill

= 30,000 + 7,500

= Rs 37,500

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Stock A/c	Dr.		60,000
	Debtors A/c	Dr.		80,000
	Land A/c	Dr.		1,00,000
	Plant and Machinery A/c	Dr.		40,000
	To Z’s Capital A/c				1,30,000
	To Premium for Goodwill A/c				1,50,000
	(Z brought assets for his share of goodwill and Capital)

	Premium for Goodwill A/c	Dr.		1,50,000
	To X’s Capital A/c				90,000
	To Y’s Capital A/c				60,000
	(Z’s share of Goodwill distributed between X and Y in sacrificing ratio)

Working Notes:

WN1

WN2

Distribution of Z’s Goodwill

Question 30:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Stock A/c	Dr.		60,000
	Debtors A/c	Dr.		80,000
	Land A/c	Dr.		1,00,000
	Plant and Machinery A/c	Dr.		40,000
	To Z’s Capital A/c				1,30,000
	To Premium for Goodwill A/c				1,50,000
	(Z brought assets for his share of goodwill and Capital)

	Premium for Goodwill A/c	Dr.		1,50,000
	To X’s Capital A/c				90,000
	To Y’s Capital A/c				60,000
	(Z’s share of Goodwill distributed between X and Y in sacrificing ratio)

Working Notes:

WN1

WN2

Distribution of Z’s Goodwill

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		14,000
	To C’s Capital A/c				8,000
	To Premium for Goodwill A/c				6,000
	(C brought capital and his share of goodwill)

	Premium for Goodwill A/c	Dr.		6,000
	To A’s Capital A/c				2,000
	To B’s Capital A/c				4,000
	(C’s share of goodwill distributed between A and B in sacrificing ratio i.e. 1:2)

	A’s Capital A/c	Dr.		2,000
	B’s Capital A/c	Dr.		4,000
	To Cash A/c				6,000
	(Amount of goodwill withdrawn by A and B)

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Cash	2,000	4,000		Balance b/d	8,000	10,000
				Cash			8,000
				Premium for Goodwill	2,000	4,000
Balance c/d	8,000	10,000	8,000
	10,000	14,000	8,000		10,000	14,000	8,000

Calculation of New (Future) Ratio

C is admitted for share of profit

Let combined share of all partners after C’s admission be = 1

Combined share of A and B after C’s admission = 1 − C’s share

Distribution of Premium for Goodwill

Question 31:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		14,000
	To C’s Capital A/c				8,000
	To Premium for Goodwill A/c				6,000
	(C brought capital and his share of goodwill)

	Premium for Goodwill A/c	Dr.		6,000
	To A’s Capital A/c				2,000
	To B’s Capital A/c				4,000
	(C’s share of goodwill distributed between A and B in sacrificing ratio i.e. 1:2)

	A’s Capital A/c	Dr.		2,000
	B’s Capital A/c	Dr.		4,000
	To Cash A/c				6,000
	(Amount of goodwill withdrawn by A and B)

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Cash	2,000	4,000		Balance b/d	8,000	10,000
				Cash			8,000
				Premium for Goodwill	2,000	4,000
Balance c/d	8,000	10,000	8,000
	10,000	14,000	8,000		10,000	14,000	8,000

Calculation of New (Future) Ratio

C is admitted for share of profit

Let combined share of all partners after C’s admission be = 1

Combined share of A and B after C’s admission = 1 − C’s share

Distribution of Premium for Goodwill

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		13,000
	To C’s Capital A/c				10,000
	To Premium for Goodwill A/c				3,000
	(C brought capital and Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		3,000
	To A’s Capital A/c				3,000
	(Premium for Goodwill transferred to A’s Capital)

	A’s Capital A/c	Dr.		3,000
	To Cash A/c				3,000
	(Premium for Goodwill withdrawn)

Working Notes:

Calculation of Sacrificing Ratio

Here only A is sacrificing his share of profit in favour of C. Hence, A will get the whole amount of premium for goodwill.

Question 32:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		13,000
	To C’s Capital A/c				10,000
	To Premium for Goodwill A/c				3,000
	(C brought capital and Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		3,000
	To A’s Capital A/c				3,000
	(Premium for Goodwill transferred to A’s Capital)

	A’s Capital A/c	Dr.		3,000
	To Cash A/c				3,000
	(Premium for Goodwill withdrawn)

Working Notes:

Calculation of Sacrificing Ratio

Here only A is sacrificing his share of profit in favour of C. Hence, A will get the whole amount of premium for goodwill.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		3,50,000
	To C’s Capital A/c				2,00,000
	To Premium for Goodwill A/c				1,50,000
	(C brought capital and Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		1,50,000
	To A’s Capital A/c				1,10,000
	To B’s Capital A/c				40,000
	(Premium for Goodwill distributed)

	A’s Capital A/c	Dr.		55,000
	B’s Capital A/c	Dr.		20,000
	To Cash A/c				75,000
	(Half of the goodwill withdrawn by A and B)

Calculation of Sacrificing Ratio

Working Notes-

WN1

Distribution of Premium for Goodwill

WN2

Amount of Premium for Goodwill withdrawn

Question 33:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		3,50,000
	To C’s Capital A/c				2,00,000
	To Premium for Goodwill A/c				1,50,000
	(C brought capital and Premium for Goodwill)

	Premium for Goodwill A/c	Dr.		1,50,000
	To A’s Capital A/c				1,10,000
	To B’s Capital A/c				40,000
	(Premium for Goodwill distributed)

	A’s Capital A/c	Dr.		55,000
	B’s Capital A/c	Dr.		20,000
	To Cash A/c				75,000
	(Half of the goodwill withdrawn by A and B)

Calculation of Sacrificing Ratio

Working Notes-

WN1

Distribution of Premium for Goodwill

WN2

Amount of Premium for Goodwill withdrawn

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	X’s Capital A/c	Dr.		15,000
	Y’s Capital A/c	Dr.		15,000
	To Goodwill A/c				30,000
	(Goodwill written-off)

	Cash A/c	Dr.		5,000
	To Premium for Goodwill A/c				5,000
	(Z brought Rs 5,000 in cash out of his share of goodwill)

	Z’s Capital A/c	Dr.		5,000
	Premium for Goodwill A/c	Dr.		4,000
	To X’s Capital A/c				4,500
	To Y’s Capital A/c				4,500
	(Z’s share of goodwill distributed between X and Y in sacrificing Ratio)

Working Notes:

WN1: Writing-off of Old Goodwill

X and Y each capital accounts will be debited by =

WN2: Distribution of Z’s share of Goodwill

X and Y will sacrifice in the old ratio (i.e. 1 : 1) as new ratio of the firm is not given.

X and Y will get =

Question 34:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	X’s Capital A/c	Dr.		15,000
	Y’s Capital A/c	Dr.		15,000
	To Goodwill A/c				30,000
	(Goodwill written-off)

	Cash A/c	Dr.		5,000
	To Premium for Goodwill A/c				5,000
	(Z brought Rs 5,000 in cash out of his share of goodwill)

	Z’s Capital A/c	Dr.		5,000
	Premium for Goodwill A/c	Dr.		4,000
	To X’s Capital A/c				4,500
	To Y’s Capital A/c				4,500
	(Z’s share of goodwill distributed between X and Y in sacrificing Ratio)

Working Notes:

WN1: Writing-off of Old Goodwill

X and Y each capital accounts will be debited by =

WN2: Distribution of Z’s share of Goodwill

X and Y will sacrifice in the old ratio (i.e. 1 : 1) as new ratio of the firm is not given.

X and Y will get =

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	A’s Capital A/c	Dr.		12,000
	B’s Capital A/c	Dr.		6,000
	To Goodwill A/c				18,000
	(Goodwill written-off)

	Cash A/c	Dr.		38,000
	To C’s Capital A/c				30,000
	To Premium for Goodwill				8,000
	(C brought Capital and goodwill)

	Premium for Goodwill A/c	Dr.		8,000
	C’s Capital A/c	Dr.		2,000
	To A’s Capital A/c				6,667
	To B’s Capital				3,333
	(C’s share of goodwill distributed between A and B in Sacrificing Ratio)

Working Notes:

WN1 Writing-off of Goodwill

A’s Capital Account will be debited by

B’s Capital Account will be debited by

WN2 Distribution of C’s share of Goodwill

Question 35:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	A’s Capital A/c	Dr.		12,000
	B’s Capital A/c	Dr.		6,000
	To Goodwill A/c				18,000
	(Goodwill written-off)

	Cash A/c	Dr.		38,000
	To C’s Capital A/c				30,000
	To Premium for Goodwill				8,000
	(C brought Capital and goodwill)

	Premium for Goodwill A/c	Dr.		8,000
	C’s Capital A/c	Dr.		2,000
	To A’s Capital A/c				6,667
	To B’s Capital				3,333
	(C’s share of goodwill distributed between A and B in Sacrificing Ratio)

Working Notes:

WN1 Writing-off of Goodwill

A’s Capital Account will be debited by

B’s Capital Account will be debited by

WN2 Distribution of C’s share of Goodwill

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	A’s Capital A/c	Dr.		1,200
	B’s Capital A/c	Dr.		800
	To Goodwill A/c				2,000
	(Goodwill written-off at the time of C’s admission)

	Cash A/c	Dr.		10,000
	To C’s Capital A/c				10,000
	(Capital brought by C)

	C’s Capital A/c	Dr.		3,000
	To A’s Capital A/c				1,800
	To B’s Capital A/c				1,200
	(C’s share of capital charged from his capital distributed between A and B in their sacrificing ratio)

Working Notes:

Writing off of goodwill already in the books (JE 1)

Question 36:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	A’s Capital A/c	Dr.		1,200
	B’s Capital A/c	Dr.		800
	To Goodwill A/c				2,000
	(Goodwill written-off at the time of C’s admission)

	Cash A/c	Dr.		10,000
	To C’s Capital A/c				10,000
	(Capital brought by C)

	C’s Capital A/c	Dr.		3,000
	To A’s Capital A/c				1,800
	To B’s Capital A/c				1,200
	(C’s share of capital charged from his capital distributed between A and B in their sacrificing ratio)

Working Notes:

Writing off of goodwill already in the books (JE 1)

Answer:

WN1: Calculation of Raoâ€™s share of Goodwill

WN2: Adjustment of Raoâ€™s share of Goodwill

(a) Where there is no Goodwill Account

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Raoâ€™s Capital A/c	Dr.		7,500
	To Murtyâ€™s Capital A/c				4,500
	To Shahâ€™s Capital A/c				3,000
	(Raoâ€™s share of goodwill charged from his capital account and distributed between Murty and Shah in sacrificing ratio i.e., 3:2)

(b) Goodwill appears at Rs 10,000

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Murtyâ€™s Capital A/c	Dr.		6,000
	Shahâ€™s Capital A/c	Dr.		4,000
	To Goodwill A/c				10,000
	(Goodwill written-off at the time of Raoâ€™s admission in old ratio)

	Raoâ€™s Capital A/c	Dr.		7,500
	To Murtyâ€™s Capital A/c				4,500
	To Shahâ€™s Capital A/c				3,000
	(Raoâ€™s share of goodwill charged from his Capital Account and distributed between Murty and Shah in sacrificing ratio i.e., 3:2)

Question 37:

WN1: Calculation of Raoâ€™s share of Goodwill

WN2: Adjustment of Raoâ€™s share of Goodwill

(a) Where there is no Goodwill Account

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Raoâ€™s Capital A/c	Dr.		7,500
	To Murtyâ€™s Capital A/c				4,500
	To Shahâ€™s Capital A/c				3,000
	(Raoâ€™s share of goodwill charged from his capital account and distributed between Murty and Shah in sacrificing ratio i.e., 3:2)

(b) Goodwill appears at Rs 10,000

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Murtyâ€™s Capital A/c	Dr.		6,000
	Shahâ€™s Capital A/c	Dr.		4,000
	To Goodwill A/c				10,000
	(Goodwill written-off at the time of Raoâ€™s admission in old ratio)

	Raoâ€™s Capital A/c	Dr.		7,500
	To Murtyâ€™s Capital A/c				4,500
	To Shahâ€™s Capital A/c				3,000
	(Raoâ€™s share of goodwill charged from his Capital Account and distributed between Murty and Shah in sacrificing ratio i.e., 3:2)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		3,20,000
	To Charu’s Capital A/c				3,20,000
	(Capital brought in by Charu)

	Charu’s Current A/c	Dr.		1,00,000
	To Anil’s Current A/c				50,000
	To Sunil’s Current A/c				50,000
	(Charu’s share of goodwill adjusted through current accounts)

Working Notes: Calculation of Hidden Goodwill

Question 38:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		3,20,000
	To Charu’s Capital A/c				3,20,000
	(Capital brought in by Charu)

	Charu’s Current A/c	Dr.		1,00,000
	To Anil’s Current A/c				50,000
	To Sunil’s Current A/c				50,000
	(Charu’s share of goodwill adjusted through current accounts)

Working Notes: Calculation of Hidden Goodwill

Answer:

Actual Capital of the firm after admission of C = A’s Capital + B’s Capital + C’s Capital

= 60,000 + 1, 20,000 + 70,000 = Rs 2, 50,000

Question 39:

Actual Capital of the firm after admission of C = A’s Capital + B’s Capital + C’s Capital

= 60,000 + 1, 20,000 + 70,000 = Rs 2, 50,000

Answer:

Total Capital of the firm after Z’s admission = X’s Capital + Y’s Capital + undistributed Profit +

Z’s Capital

= 50,000 + 50,000 + 40,000 + 80,000

= Rs 2,20,000

Question 40:

Total Capital of the firm after Z’s admission = X’s Capital + Y’s Capital + undistributed Profit +

Z’s Capital

= 50,000 + 50,000 + 40,000 + 80,000

= Rs 2,20,000

Answer:

(a)

Calculation of New Profit Sharing Ratio

Vijay is admitted for share of profit

Calculation of Goodwill

Actual total Capital of the firm after Vijay’s admission = Ashok’s Capital + Ram’s Capital + Vijay’s Capital

= 80,000 + 60,000 + 50,000

= Rs 1, 90,000

(b)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		50,000
	To Vijay’s Capital A/c				50,000
	(Capital brought in by Vijay)

	Vijay's Capital A/c	Dr.		12,000
	To Ashok’s Capital A/c				6,000
	To Ramu’s Capital A/c				6,000
	(Vijay share of goodwill distributed between Ashok and Ramu in Sacrificing ratio i.e., 1:1)

Working Notes:

Question 41:

(a)

Calculation of New Profit Sharing Ratio

Vijay is admitted for share of profit

Calculation of Goodwill

Actual total Capital of the firm after Vijay’s admission = Ashok’s Capital + Ram’s Capital + Vijay’s Capital

= 80,000 + 60,000 + 50,000

= Rs 1, 90,000

(b)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Cash A/c	Dr.		50,000
	To Vijay’s Capital A/c				50,000
	(Capital brought in by Vijay)

	Vijay's Capital A/c	Dr.		12,000
	To Ashok’s Capital A/c				6,000
	To Ramu’s Capital A/c				6,000
	(Vijay share of goodwill distributed between Ashok and Ramu in Sacrificing ratio i.e., 1:1)

Working Notes:

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Ajay’s Capital A/c	Dr.		2,00,000
	To Asin’s Capital A/c				1,00,000
	To Shreya’s Capital A/c				1,00,000
	(Ajay’s share of goodwill distributed among the old partners in their sacrificing ratio 1:1.)

Working Notes:
Calculation of Goodwill brought in by Ajay
Value of firm’s goodwill = Capitalised value of the firm – Net worth

$Capitalised value of the firm = Share of Ajay' s capital \times Reciprocal of Ajay' s share = 5, 00, 000 \times \frac{5}{1} = Rs 25, 00, 000 Net worth of the new firm = Total assets - Outside liabilities + Ajay' s capital = 15, 00, 000 - 5, 00, 000 + 5, 00, 000 = Rs 15, 00, 000 Value of firm' s goodwill = Capitalised value of firm - Net worth of the new firm = 25, 00, 000 - 15, 00, 000 = Rs 10, 00, 000 Ajay' s share of goodwill = 10, 00, 000 \times \frac{1}{5} = Rs 2, 00, 000$

Question 42:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Ajay’s Capital A/c	Dr.		2,00,000
	To Asin’s Capital A/c				1,00,000
	To Shreya’s Capital A/c				1,00,000
	(Ajay’s share of goodwill distributed among the old partners in their sacrificing ratio 1:1.)

Working Notes:
Calculation of Goodwill brought in by Ajay
Value of firm’s goodwill = Capitalised value of the firm – Net worth

$Capitalised value of the firm = Share of Ajay' s capital \times Reciprocal of Ajay' s share = 5, 00, 000 \times \frac{5}{1} = Rs 25, 00, 000 Net worth of the new firm = Total assets - Outside liabilities + Ajay' s capital = 15, 00, 000 - 5, 00, 000 + 5, 00, 000 = Rs 15, 00, 000 Value of firm' s goodwill = Capitalised value of firm - Net worth of the new firm = 25, 00, 000 - 15, 00, 000 = Rs 10, 00, 000 Ajay' s share of goodwill = 10, 00, 000 \times \frac{1}{5} = Rs 2, 00, 000$

Answer:

(a)

No entry will be recorded for Z’s goodwill because the goodwill of Z has been taken privately by X and Y.

(b)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		18,000
	To Premium for Goodwill A/c				18,000
	(Z brought his share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		18,000
	To X’s Capital A/c				13,500
	To Y’s Capital A/c				4,500
	(Goodwill of Z distributed between X and Y in their Sacrificing ratio)

Working Notes:

Distribution of Z’s share of goodwill

(c)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		18,000
	To Premium for Goodwill A/c				18,000
	(Z brought his share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		18,000
	To X’s Capital A/c				13,500
	To Y’s Capital A/c				4,500
	(Goodwill brought by Z distributed between X and Y in sacrificing ratio)

	X’s Capital A/c	Dr.		13,500
	Y’s Capital A/c	Dr.		4,500
	To Cash A/c				18,000
	(Amount which had received from Z for as goodwill withdrawn by X and Y)

Question 43:

(a)

No entry will be recorded for Z’s goodwill because the goodwill of Z has been taken privately by X and Y.

(b)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		18,000
	To Premium for Goodwill A/c				18,000
	(Z brought his share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		18,000
	To X’s Capital A/c				13,500
	To Y’s Capital A/c				4,500
	(Goodwill of Z distributed between X and Y in their Sacrificing ratio)

Working Notes:

Distribution of Z’s share of goodwill

(c)

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		18,000
	To Premium for Goodwill A/c				18,000
	(Z brought his share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		18,000
	To X’s Capital A/c				13,500
	To Y’s Capital A/c				4,500
	(Goodwill brought by Z distributed between X and Y in sacrificing ratio)

	X’s Capital A/c	Dr.		13,500
	Y’s Capital A/c	Dr.		4,500
	To Cash A/c				18,000
	(Amount which had received from Z for as goodwill withdrawn by X and Y)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Bank A/c	Dr.		3,00,000
	To Hina’s Capital A/c				3,00,000
	(Capital brought in by Hina)

	Hina’s Current A/c	Dr.		84,000
	To Disha’s Current A/c				50,400
	To Divya’s Current A/c				33,600
	(Hina’s Share of Goodwill adjusted through current accounts)

Working Note:
Calculation of Hidden Goodwill

Question 44:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Bank A/c	Dr.		3,00,000
	To Hina’s Capital A/c				3,00,000
	(Capital brought in by Hina)

	Hina’s Current A/c	Dr.		84,000
	To Disha’s Current A/c				50,400
	To Divya’s Current A/c				33,600
	(Hina’s Share of Goodwill adjusted through current accounts)

Working Note:
Calculation of Hidden Goodwill

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		50,000
	Machinery A/c	Dr.		70,000
	To Premium for Goodwill A/c				1,20,000
	(G brought cash Rs 50,000 and Machinery Rs 70,000 for his share of Goodwill)

	Premium for Goodwill A/c	Dr.		1,20,000
	To E’s Capital A/c				1,20,000
	(G share of goodwill transferred to E’s Capital Account)

	F’s Capital A/c	Dr.		30,000
	To E’s Capital A/c				30,000
	(F’s share of gain in goodwill charged from his capital and transferred to E’s capital)

Working Notes:

WN1

WN2

Calculation of F’s share of gain in goodwill

G’s share of Goodwill = 50,000 + 70,000 = Rs 1, 20,000

Goodwill of the firm on the basis of G’s share

F’s share of gain in goodwill

Question 45:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		50,000
	Machinery A/c	Dr.		70,000
	To Premium for Goodwill A/c				1,20,000
	(G brought cash Rs 50,000 and Machinery Rs 70,000 for his share of Goodwill)

	Premium for Goodwill A/c	Dr.		1,20,000
	To E’s Capital A/c				1,20,000
	(G share of goodwill transferred to E’s Capital Account)

	F’s Capital A/c	Dr.		30,000
	To E’s Capital A/c				30,000
	(F’s share of gain in goodwill charged from his capital and transferred to E’s capital)

Working Notes:

WN1

WN2

Calculation of F’s share of gain in goodwill

G’s share of Goodwill = 50,000 + 70,000 = Rs 1, 20,000

Goodwill of the firm on the basis of G’s share

F’s share of gain in goodwill

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	X’s Capital A/c	Dr.		3,000
	Y’s Capital A/c	Dr.		2,000
	To Goodwill A/c				5,000
	(Goodwill written off at the time of Z’s admission)

	Cash A/c	Dr.		41,200
	To Z’s Capital A/c				40,000
	To Premium for Goodwill A/c				1,200
	(Z brought capital and 60% of the share of his goodwill in cash)

	Premium for Goodwill A/c	Dr.		1,200
	Z’s Capital A/c	Dr.		800
	To X’s Capital A/c				1,200
	To Y’s Capital A/c				800
	(Z’s share of goodwill adjusted in X and Y is capital account in sacrificing ratio)

	X’s Capital A/c			216
	Y’s Capital A/c			144
	To Cash A/c				360
	(30% of the amount of goodwill which was brought in cash withdrawn)

	Profit and Loss Appropriation A/c	Dr.		20,000
	To X’s Capital A/c				9,600
	To Y’s Capital A/c				6,400
	To Z’s Capital A/c				4,000
	(Profit after admission of Z distributed in the new ratio)

Working Notes:

WN1: Calculation of New Profit Sharing Ratio

Z is admitted for share

Let the total profit of the firm be Re 1

So, the remaining profit after Z' admission = 1 − Z’s share

New Ratio = Old Ratio × Combined capital of X and Y after admission of Z

WN2: Written-off of goodwill already appearing in the books

WN3: Calculation of Z's share of Goodwill

Amount of goodwill brought in cash by Z

Distribution of Z’s share of Goodwill

Amount of goodwill charged from Z’s Capital Account

WN4: Amount of goodwill withdrawn by X and Y

Goodwill withdrawn in Cash = Amount of goodwill brought in Cash × Partner's Share × 30%

WN5: Distribution of Profit earned after Z’s admission (in New Ratio)

Question 46:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	X’s Capital A/c	Dr.		3,000
	Y’s Capital A/c	Dr.		2,000
	To Goodwill A/c				5,000
	(Goodwill written off at the time of Z’s admission)

	Cash A/c	Dr.		41,200
	To Z’s Capital A/c				40,000
	To Premium for Goodwill A/c				1,200
	(Z brought capital and 60% of the share of his goodwill in cash)

	Premium for Goodwill A/c	Dr.		1,200
	Z’s Capital A/c	Dr.		800
	To X’s Capital A/c				1,200
	To Y’s Capital A/c				800
	(Z’s share of goodwill adjusted in X and Y is capital account in sacrificing ratio)

	X’s Capital A/c			216
	Y’s Capital A/c			144
	To Cash A/c				360
	(30% of the amount of goodwill which was brought in cash withdrawn)

	Profit and Loss Appropriation A/c	Dr.		20,000
	To X’s Capital A/c				9,600
	To Y’s Capital A/c				6,400
	To Z’s Capital A/c				4,000
	(Profit after admission of Z distributed in the new ratio)

Working Notes:

WN1: Calculation of New Profit Sharing Ratio

Z is admitted for share

Let the total profit of the firm be Re 1

So, the remaining profit after Z' admission = 1 − Z’s share

New Ratio = Old Ratio × Combined capital of X and Y after admission of Z

WN2: Written-off of goodwill already appearing in the books

WN3: Calculation of Z's share of Goodwill

Amount of goodwill brought in cash by Z

Distribution of Z’s share of Goodwill

Amount of goodwill charged from Z’s Capital Account

WN4: Amount of goodwill withdrawn by X and Y

Goodwill withdrawn in Cash = Amount of goodwill brought in Cash × Partner's Share × 30%

WN5: Distribution of Profit earned after Z’s admission (in New Ratio)

Answer:

Capital as on April 01, 2005	2, 50,000
Less: Loss in 2005-06	(5,000)
Add: Profit in 2006-07	13,000
Add: Profit in 2007-08	17,000
Add: Profit in 2008-09	20,000
Add: Profit in 2009-10	25,000
	3,20,000
Less: Drawings	(40,000)
A’ Capital as on March 31, 2010	2, 80,000

Calculation of Goodwill

B’s Capital = A’s Capital as on March 31, 2010 =Rs 2,80,000

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		3,01,000
	To B’s Capital A/c				2,80,000
	To Premium for Goodwill A/c				21,000
	(B brought capital and goodwill)

	Premium for Goodwill A/c	Dr.		21,000
	To A’s Capital A/c				21,000
	(B’s share of goodwill transferred to A’s Capital Account)

Question 47:

Capital as on April 01, 2005	2, 50,000
Less: Loss in 2005-06	(5,000)
Add: Profit in 2006-07	13,000
Add: Profit in 2007-08	17,000
Add: Profit in 2008-09	20,000
Add: Profit in 2009-10	25,000
	3,20,000
Less: Drawings	(40,000)
A’ Capital as on March 31, 2010	2, 80,000

Calculation of Goodwill

B’s Capital = A’s Capital as on March 31, 2010 =Rs 2,80,000

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		3,01,000
	To B’s Capital A/c				2,80,000
	To Premium for Goodwill A/c				21,000
	(B brought capital and goodwill)

	Premium for Goodwill A/c	Dr.		21,000
	To A’s Capital A/c				21,000
	(B’s share of goodwill transferred to A’s Capital Account)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	General Reserve A/c	Dr.		4,000
	Revaluation A/c	Dr.		2,000
	To A’S Capital A/c				4,500
	To B’s Capital A/c				1,500
	(Profit on Revaluation and General Reserve distributed between A and B in old ratio)

Working Note:

Question 48:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	General Reserve A/c	Dr.		4,000
	Revaluation A/c	Dr.		2,000
	To A’S Capital A/c				4,500
	To B’s Capital A/c				1,500
	(Profit on Revaluation and General Reserve distributed between A and B in old ratio)

Working Note:

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Creditors A/c	Dr.		5,000
	Building A/c	Dr.		40,000
	Investments A/c	Dr.		15,000
	To Revaluation A/c				60,000
	(Increase in assets and decrease in liabilities transferred to Revaluation Account)

	Revaluation A/c	Dr.		10,000
	To Provision for Doubtful Debts A/c				5,000
	To Reserve for outstanding Repairs Bill A/c				2,000
	To Creditors A/c				3,000
	(Increase in liabilities and creation of reserves and provisions transferred to Revaluation Account)

	Revaluation A/c	Dr.		50,000
	To Partners’ Capital A/c				50,000
	(Profit on Revaluation transferred to Partners’ Capital)

Question 49:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Creditors A/c	Dr.		5,000
	Building A/c	Dr.		40,000
	Investments A/c	Dr.		15,000
	To Revaluation A/c				60,000
	(Increase in assets and decrease in liabilities transferred to Revaluation Account)

	Revaluation A/c	Dr.		10,000
	To Provision for Doubtful Debts A/c				5,000
	To Reserve for outstanding Repairs Bill A/c				2,000
	To Creditors A/c				3,000
	(Increase in liabilities and creation of reserves and provisions transferred to Revaluation Account)

	Revaluation A/c	Dr.		50,000
	To Partners’ Capital A/c				50,000
	(Profit on Revaluation transferred to Partners’ Capital)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Revaluation A/c	Dr.		4,200
	To Provision for Doubtful Debts A/c				2,500
	To Furniture A/c				500
	To Outstanding Employees Compensation A/c				1,200
	(Decrease in asset, increase in liabilities and provision transferred to Revaluation Account)

	Building A/c	Dr.		8,000
	To Revaluation A/c				8,000
	(Increase in value of building transferred to Revaluation Account)

	Revaluation A/c	Dr.		3,800
	To A’s Capital A/c				1,900
	To B’s Capital A/c				1,900
	(Profit from Revaluation Account, transferred to A and B’s Capital Account in their old ratio i.e. 1:1)

	Investment A/c	Dr.		4,300
	To A’s Capital A/c				4,300
	(A introduced capital in the form of personal investment)

Partners’ Capital Accounts
Dr.				Cr.
Particulars	A Rs	B Rs	Particulars	A Rs	B Rs
			Balance b/d	50,000	45,000
			Revaluation (Profit)	1,900	1,900
			Investments	4,300
Balance c/d	56,200	46,900
	56,200	46,900		56,200	46,900

Balance Sheet after revaluation
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		40,000	Cash in Hand		2,000
Salaries Outstanding		14,000	Cash at Bank		10,000
Outstanding Employee’s			Sundry Debtors	42,000
Compensation		1,200	Less: Provision for D. Debts	6,500	35,500
			Bills Receivable		17,000
Capital:			Stock		20,000
A	56,200		Investments	20,000
B	46,900	1,03,100	Add: A’s Personal Investment	4,300	24,300

			Furniture (5,000 – 500)		4,500
			Building (37,000 + 8,000)		45,000
		1,58,300			1,58,300

Question 50:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Revaluation A/c	Dr.		4,200
	To Provision for Doubtful Debts A/c				2,500
	To Furniture A/c				500
	To Outstanding Employees Compensation A/c				1,200
	(Decrease in asset, increase in liabilities and provision transferred to Revaluation Account)

	Building A/c	Dr.		8,000
	To Revaluation A/c				8,000
	(Increase in value of building transferred to Revaluation Account)

	Revaluation A/c	Dr.		3,800
	To A’s Capital A/c				1,900
	To B’s Capital A/c				1,900
	(Profit from Revaluation Account, transferred to A and B’s Capital Account in their old ratio i.e. 1:1)

	Investment A/c	Dr.		4,300
	To A’s Capital A/c				4,300
	(A introduced capital in the form of personal investment)

Partners’ Capital Accounts
Dr.				Cr.
Particulars	A Rs	B Rs	Particulars	A Rs	B Rs
			Balance b/d	50,000	45,000
			Revaluation (Profit)	1,900	1,900
			Investments	4,300
Balance c/d	56,200	46,900
	56,200	46,900		56,200	46,900

Balance Sheet after revaluation
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		40,000	Cash in Hand		2,000
Salaries Outstanding		14,000	Cash at Bank		10,000
Outstanding Employee’s			Sundry Debtors	42,000
Compensation		1,200	Less: Provision for D. Debts	6,500	35,500
			Bills Receivable		17,000
Capital:			Stock		20,000
A	56,200		Investments	20,000
B	46,900	1,03,100	Add: A’s Personal Investment	4,300	24,300

			Furniture (5,000 – 500)		4,500
			Building (37,000 + 8,000)		45,000
		1,58,300			1,58,300

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	General Reserve A/c	Dr.		16,000
	To Ram’s Capital A/c				12,000
	To Shyam’s Capital A/c				4,000
	(General Reserve distributed at the time of Mohan’s admission)

	Revaluation A/c	Dr.		1,000
	To Provision for Outstanding Repair Bill A/c				1,000
	(Provision for outstanding Repair Bill Made)

	Building A/c	Dr.		20,000
	Provision for Doubtful Debts A/c	Dr.		1,000
	To Revaluation A/c				21,000
	(Building appreciated and Provision for Doubtful Debt reduced)

	Revaluation A/c	Dr.		20,000
	To Ram’s Capital A/c				15,000
	To Shyam’s Capital A/c				5,000
	(Profit on revaluation distributed between Ram and Mohan in old ratio)

	Cash A/c	Dr.		52,000
	To Mohan’s Capital				40,000
	To Premium for Goodwill A/c				12,000
	(Mohan brought Capital and Premium for goodwill)

	Premium for Goodwill A/c	Dr.		12,000
	To Ram’s Capital A/c				8,000
	To Shyam’s Capital A/c				4,000
	(Premium of Mohan distributed between Ram and Mohan in sacrificing ratio i.e. 2:1)

Calculation of Future (New) Ratio

Mohan admitted for share

Working Notes: Distribution of General Revenue (in Old Ratio)

Question 51:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	General Reserve A/c	Dr.		16,000
	To Ram’s Capital A/c				12,000
	To Shyam’s Capital A/c				4,000
	(General Reserve distributed at the time of Mohan’s admission)

	Revaluation A/c	Dr.		1,000
	To Provision for Outstanding Repair Bill A/c				1,000
	(Provision for outstanding Repair Bill Made)

	Building A/c	Dr.		20,000
	Provision for Doubtful Debts A/c	Dr.		1,000
	To Revaluation A/c				21,000
	(Building appreciated and Provision for Doubtful Debt reduced)

	Revaluation A/c	Dr.		20,000
	To Ram’s Capital A/c				15,000
	To Shyam’s Capital A/c				5,000
	(Profit on revaluation distributed between Ram and Mohan in old ratio)

	Cash A/c	Dr.		52,000
	To Mohan’s Capital				40,000
	To Premium for Goodwill A/c				12,000
	(Mohan brought Capital and Premium for goodwill)

	Premium for Goodwill A/c	Dr.		12,000
	To Ram’s Capital A/c				8,000
	To Shyam’s Capital A/c				4,000
	(Premium of Mohan distributed between Ram and Mohan in sacrificing ratio i.e. 2:1)

Calculation of Future (New) Ratio

Mohan admitted for share

Working Notes: Distribution of General Revenue (in Old Ratio)

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		5,000
	To Somesh Capital A/c				4,000
	To Premium for Goodwill A/c				1,000
	(Somesh brought capital and share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		1,000
	To Mukesh’s Capital A/c				667
	To Rajesh’s Capital A/c				333
	(Somesh’s goodwill transferred to Mukesh and Ramesh’s capital accounts in their sacrificing ratio i.e. 2:1)

Balance Sheet after admission of Somesh
Liabilities		Amount Rs	Assets	Amount Rs

Capital:			Sundry Assets	14,000
Mukesh	(5,000 + 667)	5,667	(Balancing Figure)
Rajesh	(4,000 + 333)	4,333
Somesh		4,000
		14,000		14,000

Working Notes:

WN1

WN2

Distribution of Premium for Goodwill

Question 52:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		5,000
	To Somesh Capital A/c				4,000
	To Premium for Goodwill A/c				1,000
	(Somesh brought capital and share of goodwill in cash)

	Premium for Goodwill A/c	Dr.		1,000
	To Mukesh’s Capital A/c				667
	To Rajesh’s Capital A/c				333
	(Somesh’s goodwill transferred to Mukesh and Ramesh’s capital accounts in their sacrificing ratio i.e. 2:1)

Balance Sheet after admission of Somesh
Liabilities		Amount Rs	Assets	Amount Rs

Capital:			Sundry Assets	14,000
Mukesh	(5,000 + 667)	5,667	(Balancing Figure)
Rajesh	(4,000 + 333)	4,333
Somesh		4,000
		14,000		14,000

Working Notes:

WN1

WN2

Distribution of Premium for Goodwill

Answer:

Balance Sheet before admission of W
Liabilities		Amount Rs	Assets	Amount Rs

Capital:			Motors	1,200
X	1,500		Furniture	400
Y	1,750		Stock	2,650
Z	2,000	5,250	Debtors	3,780
Other Liabilities		3,000	Cash (Balancing Figure)	220
		8,250		8,250

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		3,300
	To W’s Capital A/c				1,800
	To Premium for Goodwill A/c				1,500
	(W brought his share of goodwill and capital in cash)

	Premium for Goodwill A/c	Dr.		1,500
	To X’s Capital A/c				500
	To Y’s Capital A/c				500
	To Z’s Capital A/c				500
	(Premium for goodwill distributed between X, Y and Z in sacrificing ratio)

	Revaluation A/c	Dr.		270
	To Motors A/c				250
	To Furniture A/c				20
	(Decrease in value of Motors and Furniture transferred to Revaluation Account)

	X’s Capital A/c	Dr.		90
	Y’s Capital A/c	Dr.		90
	Z’s Capital A/c	Dr.		90
	To Revaluation A/c				270
	(Loss on revaluation transferred to Capital Account)

Balance Sheet after admission of W
Liabilities	Amount Rs	Assets	Amount Rs

Capital:		Motors (1,200 – 250)	950
X (1,500 – 90 + 500)	1,910	Furniture (400 – 20)	380
Y (1,750 – 90 + 500)	2,160	Stock	2,650
Z (2,000 – 90 + 500)	2,410	Debtors	3,780
W	1,800	Cash (220 + 3,300)	3,520
Other Liabilities	3,000
	11,280		11,280

Working Notes:

WN1

WN2

Distribution of Premium for Goodwill

WN3

Distribution of loss Revaluation

Question 53:

Balance Sheet before admission of W
Liabilities		Amount Rs	Assets	Amount Rs

Capital:			Motors	1,200
X	1,500		Furniture	400
Y	1,750		Stock	2,650
Z	2,000	5,250	Debtors	3,780
Other Liabilities		3,000	Cash (Balancing Figure)	220
		8,250		8,250

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		3,300
	To W’s Capital A/c				1,800
	To Premium for Goodwill A/c				1,500
	(W brought his share of goodwill and capital in cash)

	Premium for Goodwill A/c	Dr.		1,500
	To X’s Capital A/c				500
	To Y’s Capital A/c				500
	To Z’s Capital A/c				500
	(Premium for goodwill distributed between X, Y and Z in sacrificing ratio)

	Revaluation A/c	Dr.		270
	To Motors A/c				250
	To Furniture A/c				20
	(Decrease in value of Motors and Furniture transferred to Revaluation Account)

	X’s Capital A/c	Dr.		90
	Y’s Capital A/c	Dr.		90
	Z’s Capital A/c	Dr.		90
	To Revaluation A/c				270
	(Loss on revaluation transferred to Capital Account)

Balance Sheet after admission of W
Liabilities	Amount Rs	Assets	Amount Rs

Capital:		Motors (1,200 – 250)	950
X (1,500 – 90 + 500)	1,910	Furniture (400 – 20)	380
Y (1,750 – 90 + 500)	2,160	Stock	2,650
Z (2,000 – 90 + 500)	2,410	Debtors	3,780
W	1,800	Cash (220 + 3,300)	3,520
Other Liabilities	3,000
	11,280		11,280

Working Notes:

WN1

WN2

Distribution of Premium for Goodwill

WN3

Distribution of loss Revaluation

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		20,880
	To C’s Capital A/c				15,000
	To Premium for Goodwill A/c				5,880
	(C brought capital and share of goodwill)

	Premium for Goodwill A/c	Dr.		5,880
	To A’s Capital A/c				3,528
	To B’s Capital A/c				2,352
	(Premium for Goodwill distributed between A and B in sacrificing ratio i.e. 3:1)

Partners’ Capital Account
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	51,450	36,750
				Cash			15,000
Balance c/d	54,978	39,102	15,000	Premium for Goodwill	3,528	2,352
	54,978	39,102	15,000		54,978	39,102	15,000

Balance Sheet after Admission of C
Liabilities		Amount Rs	Assets	Amount Rs

Capital:			Cash (1,500 + 20,880)	22,380
A	54,978		Stock	28,000
B	39,102		Debtors	19,500
C	15,000	1,09,080	Furniture	2,500
Creditors		11,800	Machinery	48,500
		1,20,880		1,20,880

Calculation of New Profit Sharing Ratio

C is admitted for share of profit

Let combined share of all partners after admission of C be = 1

Combined share of A and B after C’s admission = 1 − C’s share

Working Note-

WN1

WN2

Question 54:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		20,880
	To C’s Capital A/c				15,000
	To Premium for Goodwill A/c				5,880
	(C brought capital and share of goodwill)

	Premium for Goodwill A/c	Dr.		5,880
	To A’s Capital A/c				3,528
	To B’s Capital A/c				2,352
	(Premium for Goodwill distributed between A and B in sacrificing ratio i.e. 3:1)

Partners’ Capital Account
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	51,450	36,750
				Cash			15,000
Balance c/d	54,978	39,102	15,000	Premium for Goodwill	3,528	2,352
	54,978	39,102	15,000		54,978	39,102	15,000

Balance Sheet after Admission of C
Liabilities		Amount Rs	Assets	Amount Rs

Capital:			Cash (1,500 + 20,880)	22,380
A	54,978		Stock	28,000
B	39,102		Debtors	19,500
C	15,000	1,09,080	Furniture	2,500
Creditors		11,800	Machinery	48,500
		1,20,880		1,20,880

Calculation of New Profit Sharing Ratio

C is admitted for share of profit

Let combined share of all partners after admission of C be = 1

Combined share of A and B after C’s admission = 1 − C’s share

Working Note-

WN1

WN2

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Profit and Loss Adjustment A/c	Dr.		1,750
	To Stock A/c				500
	To Plant and Machinery A/c				875
	To Reserve for Doubtful Debts A/c				375
	(Decrease in stock and Plant and creation of Reserve for Doubtful Debt transferred to Profit and Loss Adjustment Account)

	Building A/c	Dr.		2,500
	To Profit and Loss Adjustment A/c				2,500
	(Increase in value of Building of transferred to Profit and loss Adjustment Accounts)

	Profit and Loss Adjustment A/c			750
	To A’s Capital A/c				500
	To B’s Capital A/c				250
	(Profit on revaluation of asset and liabilities distributed between A and B in their old ratio)

	Cash A/c	Dr.		10,500
	To C’s Capital A/c				7,500
	To Premium for Goodwill A/c				3,000
	(C brought capital and share of goodwill)

	Premium for Goodwill A/c	Dr.		3,000
	To A’s Capital A/c				2,000
	To B’s Capital A/c				1,000
	(Premium for Goodwill distributed between A and B in their sacrificing ratio i.e 2:1)

Profit and Loss Adjustment Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Stock	500
Plant and Machinery	875	Building	2,500
Reserve for Doubtful Debts	375
Profit transferred to
A Capital	500
B Capital	250
	2,500		2,500

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	15,000	10,000
				Cash			7,500
				Premium for Goodwill	2,000	1,000
Balance c/d	17,500	11,250	7,500	Profit and Loss Adjustment (Profit)	500	250
	17,500	11,250	7,500		17,500	11,250	7,500

Balance Sheet as on March 31, 2012 after admission of C
Liabilities		Amount Rs	Assets		Amounts Rs

Capital Accounts:			Building (25,000 + 2,500)		27,500
A	17,500		Plant and Machinery (17,500 – 875)		16,625
B	11,250		Stock (10,000 – 500)		9,500
C	7,500	36,250
Sundry Creditors		32,950	Sundry Debtors	4,850
			Less: Provision for D. Debts	375	4,475
			Cash in Hand (600 + 10,500)		11,100
		69,200			69,200

Working Notes:

WN1

WN2

Distribution of Premium for Goodwill (in sacrificing ratio)

WN3

Distribution of Profit from Profit and loss Adjustment Account (in old ratio)

Question 55:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Profit and Loss Adjustment A/c	Dr.		1,750
	To Stock A/c				500
	To Plant and Machinery A/c				875
	To Reserve for Doubtful Debts A/c				375
	(Decrease in stock and Plant and creation of Reserve for Doubtful Debt transferred to Profit and Loss Adjustment Account)

	Building A/c	Dr.		2,500
	To Profit and Loss Adjustment A/c				2,500
	(Increase in value of Building of transferred to Profit and loss Adjustment Accounts)

	Profit and Loss Adjustment A/c			750
	To A’s Capital A/c				500
	To B’s Capital A/c				250
	(Profit on revaluation of asset and liabilities distributed between A and B in their old ratio)

	Cash A/c	Dr.		10,500
	To C’s Capital A/c				7,500
	To Premium for Goodwill A/c				3,000
	(C brought capital and share of goodwill)

	Premium for Goodwill A/c	Dr.		3,000
	To A’s Capital A/c				2,000
	To B’s Capital A/c				1,000
	(Premium for Goodwill distributed between A and B in their sacrificing ratio i.e 2:1)

Profit and Loss Adjustment Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Stock	500
Plant and Machinery	875	Building	2,500
Reserve for Doubtful Debts	375
Profit transferred to
A Capital	500
B Capital	250
	2,500		2,500

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	15,000	10,000
				Cash			7,500
				Premium for Goodwill	2,000	1,000
Balance c/d	17,500	11,250	7,500	Profit and Loss Adjustment (Profit)	500	250
	17,500	11,250	7,500		17,500	11,250	7,500

Balance Sheet as on March 31, 2012 after admission of C
Liabilities		Amount Rs	Assets		Amounts Rs

Capital Accounts:			Building (25,000 + 2,500)		27,500
A	17,500		Plant and Machinery (17,500 – 875)		16,625
B	11,250		Stock (10,000 – 500)		9,500
C	7,500	36,250
Sundry Creditors		32,950	Sundry Debtors	4,850
			Less: Provision for D. Debts	375	4,475
			Cash in Hand (600 + 10,500)		11,100
		69,200			69,200

Working Notes:

WN1

WN2

Distribution of Premium for Goodwill (in sacrificing ratio)

WN3

Distribution of Profit from Profit and loss Adjustment Account (in old ratio)

Answer:

(a) If M acquires his share of profit from the firm in the original ratios of the partners.

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		4,00,000
	To M’s Capital A/c				3,00,000
	To Premium for Goodwill A/c				1,00,000
	(M brought capital and his of goodwill in cash)

	Premium for Goodwill A/c	Dr.		1,00,000
	To J’s Capital A/c				60,000
	To K’s Capital A/c				40,000
	(Premium for Goodwill distributed between J and K in their Sacrificing Ratio)

	Reserve A/c	Dr.		1,00,000
	To J’s Capital A/c				60,000
	To K’s Capital A/c				40,000
	(Reserve distribution between M and J in their old ratio)

Partners’ Capital Accounts
Dr.							Cr.
Particulars	J	K	M	Particulars	J	K	M
				Balance b/d	1,00,000	1,50,000
				Cash			3,00,000
				Premium for Goodwill	69,000	40,000
Balance c/d	2,20,000	2,30,000	3,00,000	Reserve	60,000	40,000
	2,20,000	2,30,000	3,00,000		2,20,000	2,30,000	3,00,000

Balance Sheet as on April 01, 2014 after M’s admission
Liabilities	Amount Rs	Assets	Amount Rs

		Cash (2,00,000 + 4,00,000)	6,00,000
J’s Capital	2,20,000	Other Assets	1,50,000
K’s Capital	2,30,000
M’s Capital	3,00,000
	7,50,000		7,50,000

Calculation of Future (New) Profit Sharing Ratio

M is admitted for share of profit

Let the combined share of all partners after admission of M be = 1

Combined share of J and K after M’s admission = 1 − M’s share

Working Notes-

WN1

Distribution of Premium for Goodwill (in sacrificing ratio)

WN2

Distribution of General Reserve (in old ratio)

J will get

K will get

(b) If M acquires his share of profit from the firm in equal proportions from the original partners.

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Reserve A/c	Dr.		1,00,000
	To J’s Capital A/c				60,000
	To K’s Capital A/c				40,000
	(Reserve distributed between J and K in old ratio)

	Cash A/c	Dr.		4,00,000
	To M’s Capital A/c				3,00,000
	To J’s Premium for Goodwill A/c				1,00,000
	(M brought capital and his share of goodwill)

	Premium for Goodwill A/c	Dr.		1,00,000
	To J’s Capital A/c				50,000
	To K’s Capital A/c				50,000
	(Premium for Goodwill distributed between J and K in sacrificing Raito i.e 1:1)

Partners’ Capital Accounts
Dr.							Cr.
Particulars	J	K	M	Particulars	J	K	M
				Balance b/d	1,00,000	1,50,000
				Cash			3,00,000
				Premium for Goodwill	50,000	50,000
Balance c/d	2,10,000	2,40,000	3,00,000	Reserve	60,000	40,000
	2,10,000	2,40,000	3,00,000		2,10,000	2,40,000	3,00,000

Balance Sheet as on April 01, 2014 after M’s admission
Liabilities	Amount Rs	Assets	Amount Rs

J’s Capital	2,10,000	Cash (2,00,000 + 4,00,000)	6,00,000
K’s Capital	2,40,000	Others Assets	1,50,000
M’s Capital	3,00,000
	7,50,000		7,50,000

Calculation of future (new) profit sharing ratio

M is admitted for share of profit

J and K each will sacrifice in favour of

Working Notes:

WN1

Distribution of Premium for Goodwill (in Sacrificing ratio)

J and K each will get

WN2

Distribution of General Reserve (in old ratio)

J will get

K will get

(c) If M acquires his share of profit in the ratio of 3:1 from the original partners

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Reserve A/c	Dr.		1,00,000
	To J’s Capital A/c				60,000
	(Reserve distributed between J and K at the time of M’s admission)

	Cash A/c	Dr.		4,00,000
	To M’s Capital A/c				3,00,000
	To Premium for Goodwill A/c				1,00,000
	(M brought Capital his share of Goodwill)

	Premium for Goodwill A/c	Dr.		1,00,000
	To J’s Capital A/c				75,000
	To K’s Capital A/c				25,000
	(Premium for Goodwill distributed between J and K in their sacrificing ratio i.e 3:1)

Partners’ Capital Accounts
Dr.							Cr.
Particulars	J	K	M	Particulars	J	K	M
				Balance b/d	1,00,000	1,50,000
				Cash			3,00,000
				Premium for Goodwill	75,000	25,000
				Reserve	60,000	40,000
Balance c/d	2,35,000	2,15,000	3,00,000
	2,35,000	2,15,000	3,00,000		2,35,000	2,15,000	3,00,000

Balance Sheet as on April 01, 2014 after M’s admission
Liabilities	Amount Rs	Assets	Amount Rs

J’s Capital	2,35,000	Cash (2,00,000 + 4,00,000)	6,00,000
K’s Capital	2,15,000	Other Assets	1,50,000
M’s Capital	3,00,000
	7,50,000		7,50,000

Calculation of Future (New) Profit Sharing Ratio

M is admitted for share of profit

New Ratio = Old Ratio − Sacrificing Ratio

Working Notes:

WN1

Distribution of Premium for Goodwill (in sacrificing ratio)

WN2

Distribution of Reserve (in old ratio)

Question 56:

(a) If M acquires his share of profit from the firm in the original ratios of the partners.

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Cash A/c	Dr.		4,00,000
	To M’s Capital A/c				3,00,000
	To Premium for Goodwill A/c				1,00,000
	(M brought capital and his of goodwill in cash)

	Premium for Goodwill A/c	Dr.		1,00,000
	To J’s Capital A/c				60,000
	To K’s Capital A/c				40,000
	(Premium for Goodwill distributed between J and K in their Sacrificing Ratio)

	Reserve A/c	Dr.		1,00,000
	To J’s Capital A/c				60,000
	To K’s Capital A/c				40,000
	(Reserve distribution between M and J in their old ratio)

Partners’ Capital Accounts
Dr.							Cr.
Particulars	J	K	M	Particulars	J	K	M
				Balance b/d	1,00,000	1,50,000
				Cash			3,00,000
				Premium for Goodwill	69,000	40,000
Balance c/d	2,20,000	2,30,000	3,00,000	Reserve	60,000	40,000
	2,20,000	2,30,000	3,00,000		2,20,000	2,30,000	3,00,000

Balance Sheet as on April 01, 2014 after M’s admission
Liabilities	Amount Rs	Assets	Amount Rs

		Cash (2,00,000 + 4,00,000)	6,00,000
J’s Capital	2,20,000	Other Assets	1,50,000
K’s Capital	2,30,000
M’s Capital	3,00,000
	7,50,000		7,50,000

Calculation of Future (New) Profit Sharing Ratio

M is admitted for share of profit

Let the combined share of all partners after admission of M be = 1

Combined share of J and K after M’s admission = 1 − M’s share

Working Notes-

WN1

Distribution of Premium for Goodwill (in sacrificing ratio)

WN2

Distribution of General Reserve (in old ratio)

J will get

K will get

(b) If M acquires his share of profit from the firm in equal proportions from the original partners.

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Reserve A/c	Dr.		1,00,000
	To J’s Capital A/c				60,000
	To K’s Capital A/c				40,000
	(Reserve distributed between J and K in old ratio)

	Cash A/c	Dr.		4,00,000
	To M’s Capital A/c				3,00,000
	To J’s Premium for Goodwill A/c				1,00,000
	(M brought capital and his share of goodwill)

	Premium for Goodwill A/c	Dr.		1,00,000
	To J’s Capital A/c				50,000
	To K’s Capital A/c				50,000
	(Premium for Goodwill distributed between J and K in sacrificing Raito i.e 1:1)

Partners’ Capital Accounts
Dr.							Cr.
Particulars	J	K	M	Particulars	J	K	M
				Balance b/d	1,00,000	1,50,000
				Cash			3,00,000
				Premium for Goodwill	50,000	50,000
Balance c/d	2,10,000	2,40,000	3,00,000	Reserve	60,000	40,000
	2,10,000	2,40,000	3,00,000		2,10,000	2,40,000	3,00,000

Balance Sheet as on April 01, 2014 after M’s admission
Liabilities	Amount Rs	Assets	Amount Rs

J’s Capital	2,10,000	Cash (2,00,000 + 4,00,000)	6,00,000
K’s Capital	2,40,000	Others Assets	1,50,000
M’s Capital	3,00,000
	7,50,000		7,50,000

Calculation of future (new) profit sharing ratio

M is admitted for share of profit

J and K each will sacrifice in favour of

Working Notes:

WN1

Distribution of Premium for Goodwill (in Sacrificing ratio)

J and K each will get

WN2

Distribution of General Reserve (in old ratio)

J will get

K will get

(c) If M acquires his share of profit in the ratio of 3:1 from the original partners

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Reserve A/c	Dr.		1,00,000
	To J’s Capital A/c				60,000
	(Reserve distributed between J and K at the time of M’s admission)

	Cash A/c	Dr.		4,00,000
	To M’s Capital A/c				3,00,000
	To Premium for Goodwill A/c				1,00,000
	(M brought Capital his share of Goodwill)

	Premium for Goodwill A/c	Dr.		1,00,000
	To J’s Capital A/c				75,000
	To K’s Capital A/c				25,000
	(Premium for Goodwill distributed between J and K in their sacrificing ratio i.e 3:1)

Partners’ Capital Accounts
Dr.							Cr.
Particulars	J	K	M	Particulars	J	K	M
				Balance b/d	1,00,000	1,50,000
				Cash			3,00,000
				Premium for Goodwill	75,000	25,000
				Reserve	60,000	40,000
Balance c/d	2,35,000	2,15,000	3,00,000
	2,35,000	2,15,000	3,00,000		2,35,000	2,15,000	3,00,000

Balance Sheet as on April 01, 2014 after M’s admission
Liabilities	Amount Rs	Assets	Amount Rs

J’s Capital	2,35,000	Cash (2,00,000 + 4,00,000)	6,00,000
K’s Capital	2,15,000	Other Assets	1,50,000
M’s Capital	3,00,000
	7,50,000		7,50,000

Calculation of Future (New) Profit Sharing Ratio

M is admitted for share of profit

New Ratio = Old Ratio − Sacrificing Ratio

Working Notes:

WN1

Distribution of Premium for Goodwill (in sacrificing ratio)

WN2

Distribution of Reserve (in old ratio)

Answer:

Profit and Loss Adjustment Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Stock		1,800	Building	15,000
Furniture		440
Provision for Doubtful Debts		275
Profit transferred to
Shyamlal Capital	4,994
Sanjay Capital	7,491	12,485
		15,000		15,000

Partners’ Capital Account
Dr.							Cr.
Particulars	Shyamlal	Sanjay	Shanker	Particulars	Shyamlal	Sanjay	Shanker
				Balance b/d	34,050	34,050
				Cash A/c			30,000
				Premium for Goodwill	8,000	12,000
Balance c/d	47,044	53,541	30,000	Revaluation	4,994	7,491
	47,044	53,541	30,000		47,044	53,541	30,000

Balance Sheet as on April 01, 2014 after Shanker’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors		12,435	Cash in Hand (710 + 50,000)		50,710
Capital A/cs:			Cash at Bank		11,925
Shyamlal	47,044		Sundry Debtors	5,500
Sanjay	53,541		Less: Provision for D. Debts	275	5,225
Shanker	30,000	1,30,585	Stock (18,000 – 1,800)		16,200
			Building (40,000 + 15,000)		55,000
			Furniture (4,400 – 440)		3,960
		1,43,020			1,43,020

Working Notes:

WN1

Distribution of Premium for Goodwill (in sacrificing ratio)

WN2

Distribution of Profit from Profit and Loss Adjustment Account (in old ratio)

Question 57:

Profit and Loss Adjustment Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Stock		1,800	Building	15,000
Furniture		440
Provision for Doubtful Debts		275
Profit transferred to
Shyamlal Capital	4,994
Sanjay Capital	7,491	12,485
		15,000		15,000

Partners’ Capital Account
Dr.							Cr.
Particulars	Shyamlal	Sanjay	Shanker	Particulars	Shyamlal	Sanjay	Shanker
				Balance b/d	34,050	34,050
				Cash A/c			30,000
				Premium for Goodwill	8,000	12,000
Balance c/d	47,044	53,541	30,000	Revaluation	4,994	7,491
	47,044	53,541	30,000		47,044	53,541	30,000

Balance Sheet as on April 01, 2014 after Shanker’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Sundry Creditors		12,435	Cash in Hand (710 + 50,000)		50,710
Capital A/cs:			Cash at Bank		11,925
Shyamlal	47,044		Sundry Debtors	5,500
Sanjay	53,541		Less: Provision for D. Debts	275	5,225
Shanker	30,000	1,30,585	Stock (18,000 – 1,800)		16,200
			Building (40,000 + 15,000)		55,000
			Furniture (4,400 – 440)		3,960
		1,43,020			1,43,020

Working Notes:

WN1

Distribution of Premium for Goodwill (in sacrificing ratio)

WN2

Distribution of Profit from Profit and Loss Adjustment Account (in old ratio)

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars			Amount Rs

Provision for doubtful Debts	1,700	Prepaid Advt. Expense			1,200
A’s Capital (Rev. Exp.)	2,100	B’s Capital (Personal Exp.)			2,000

		Loss transferred to
		A Capital		300
		B Capital		200
		C Capital		100	600
	3,800				3,800

Partners’ Capital Accounts
Dr.					Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D
Revaluation		2,000			Balance b/d	60,000	60,000	40,000
(Personal Exp.)					Creditors				10,000
Revaluation (Loss)	300	200	100		Cash				40,000
Balance c/d	61,800	57,800	39,900	50,000	Revaluation (Exp.)	2,100
	62,100	60,000	40,000	50,000		62,100	60,000	40,000	50,000

Balance Sheet as on April 01,2014 after D’s admission
Liabilities			Amount Rs	Assets		Amount Rs

Capital Accounts:				Land and Building		50,000
A	61,800			Plant and Machinery		40,000
B	57,800			Furniture		30,000
C	39,900			Prepaid Advt. Expenses		1,200
D	50,000		2,09,500	Stock		20,000
				Debtors	30,000
Creditors	30,000			Add: B/R dishonor	4,000
Less: D’s Capital		10,000	20,000	Less: 5% Provision for D Debts	(1,700)	32,300
Bill Payable			10,000
				Bills Receivable		20,000
				Bank (10,000 + 40,000 - 4,000)		46,000
			2,39,500			2,39,500

Working Note:

Distribution of Loss on Revaluation

Question 58:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars			Amount Rs

Provision for doubtful Debts	1,700	Prepaid Advt. Expense			1,200
A’s Capital (Rev. Exp.)	2,100	B’s Capital (Personal Exp.)			2,000

		Loss transferred to
		A Capital		300
		B Capital		200
		C Capital		100	600
	3,800				3,800

Partners’ Capital Accounts
Dr.					Cr.
Particulars	A	B	C	D	Particulars	A	B	C	D
Revaluation		2,000			Balance b/d	60,000	60,000	40,000
(Personal Exp.)					Creditors				10,000
Revaluation (Loss)	300	200	100		Cash				40,000
Balance c/d	61,800	57,800	39,900	50,000	Revaluation (Exp.)	2,100
	62,100	60,000	40,000	50,000		62,100	60,000	40,000	50,000

Balance Sheet as on April 01,2014 after D’s admission
Liabilities			Amount Rs	Assets		Amount Rs

Capital Accounts:				Land and Building		50,000
A	61,800			Plant and Machinery		40,000
B	57,800			Furniture		30,000
C	39,900			Prepaid Advt. Expenses		1,200
D	50,000		2,09,500	Stock		20,000
				Debtors	30,000
Creditors	30,000			Add: B/R dishonor	4,000
Less: D’s Capital		10,000	20,000	Less: 5% Provision for D Debts	(1,700)	32,300
Bill Payable			10,000
				Bills Receivable		20,000
				Bank (10,000 + 40,000 - 4,000)		46,000
			2,39,500			2,39,500

Working Note:

Distribution of Loss on Revaluation

Answer:

Revaluation Account
Particulars		Amount Rs	Particulars	Amount Rs

Provision for Damages		1,500	Land and Building	6,000
Outstanding Electricity Bill		300	(30,000 × 20%)
Stock		2,000	Creditors (unclaimed)	1,200
Furniture		1,000
Reserve for Doubtful Debts (15,000 × 5%)		750
Profit transferred to Capital Accounts		1,650
M	1,100
S	550
		7,200		7,200

Partners’ Capital Accounts
Dr.							Cr.
Particulars	M	S	R	Particulars	M	S	R
Bank (Goodwill withdrawn)	2,000	1,000		Balance b/d	30,000	20,000
				Bank			15,000
				Premium Goodwill	4,000	2,000
Balance c/d	33,100	21,550	15,000	Revaluation (profit)	1,100	550
	35,100	22,550	15,000		35,100	22,550	15,000

Balance Sheet as on April 01, 2014 after M’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Provision for Damages		1,500	Cash at Bank (17,000 + 21,000 –3,000)		35,000
Outstanding Electricity Bill		300	Stock (25,000 –2,000)		23,000
Sundry Creditors (44,000 – 1,200)		42,800	Furniture and Fixtures (3,000 – 1,000)		2,000
Capital A/cs:			Sundry Debtors	15,000
M	33,100		Less: 5% Reserve for D. Debts	750	14,250
S	21,550		Bills Receivable		4,000
R	15,000	69,650	Land and Building (30,000 + 6,000)		36,000
		1,14,250			1,14,250

Working Notes:

WN1: Sacrificing Ratio

WN2: Distribution of Premium for Goodwill (in sacrificing ratio)

WN3: Withdrawn of Premium for Goodwill

WN4: Distribution of Revaluation Profit (in old ratio)

Values involved in the above scenario are as follows:

Equality
Opportunity to earn
Fulfilling Social responsibility

Question 59:

Revaluation Account
Particulars		Amount Rs	Particulars	Amount Rs

Provision for Damages		1,500	Land and Building	6,000
Outstanding Electricity Bill		300	(30,000 × 20%)
Stock		2,000	Creditors (unclaimed)	1,200
Furniture		1,000
Reserve for Doubtful Debts (15,000 × 5%)		750
Profit transferred to Capital Accounts		1,650
M	1,100
S	550
		7,200		7,200

Partners’ Capital Accounts
Dr.							Cr.
Particulars	M	S	R	Particulars	M	S	R
Bank (Goodwill withdrawn)	2,000	1,000		Balance b/d	30,000	20,000
				Bank			15,000
				Premium Goodwill	4,000	2,000
Balance c/d	33,100	21,550	15,000	Revaluation (profit)	1,100	550
	35,100	22,550	15,000		35,100	22,550	15,000

Balance Sheet as on April 01, 2014 after M’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Provision for Damages		1,500	Cash at Bank (17,000 + 21,000 –3,000)		35,000
Outstanding Electricity Bill		300	Stock (25,000 –2,000)		23,000
Sundry Creditors (44,000 – 1,200)		42,800	Furniture and Fixtures (3,000 – 1,000)		2,000
Capital A/cs:			Sundry Debtors	15,000
M	33,100		Less: 5% Reserve for D. Debts	750	14,250
S	21,550		Bills Receivable		4,000
R	15,000	69,650	Land and Building (30,000 + 6,000)		36,000
		1,14,250			1,14,250

Working Notes:

WN1: Sacrificing Ratio

WN2: Distribution of Premium for Goodwill (in sacrificing ratio)

WN3: Withdrawn of Premium for Goodwill

WN4: Distribution of Revaluation Profit (in old ratio)

Values involved in the above scenario are as follows:

Equality
Opportunity to earn
Fulfilling Social responsibility

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Machinery	1,200
Building	2,850	Loss transferred to
Furniture	600	Madan Capital	3,075
Provision for Doubt Debts	1,500	Krishna Capital	3,075
	6,150		6,150

Partners’ Capital Accounts
Dr.				Cr.
Particulars	Madan	Krishna	Ram	Particulars	Madan	Krishna	Ram
Revaluation (Loss)	3,075	3,075		Balance b/d	45,000	30,000
Madan’s Capital			15,000	Cash			45,000
Krishna’s Capital			15,000	Reserve	9,000	9,000
				Ram’s Capital	15,000	15,000
Balance c/d	65,925	50,925	15,000	(share of Goodwill)
	69,000	54,000	45,000		69,000	54,000	45,000

Balance Sheet as on March 31, 2014 after Ram’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Outstanding Expenses		10,000	Cash in Hand (4,000 + 45,000)		49,000
Sundry Creditors		30,000	Cash at Bank		56,000
Bank Overdraft		20,000	Debtors	30,000
Bills Payable		30,000	Less: 5% Prov. For D. Debts	1,500	28,500
Capital A/cs			Furniture (12,000 – 600)		11,400
Madan	65,925		Machinery (24,000 – 1,200)		22,800
Krishna	50,925		Building (57,000 – 2,850)		54,150
Ram	15,000	1,31,850
		2,21,850			2,21,850

WN1

Treatment of Goodwill

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Ram’s Capital A/c	Dr.		30,000
To Madan’s Capital				15,000
To Krishna’s Capital				15,000
(Ram’s share of goodwill charged from his capital)

WN2

Distribution of Revaluation Loss

Madan and Krishna Capital Account will be debited by

Question 60:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Machinery	1,200
Building	2,850	Loss transferred to
Furniture	600	Madan Capital	3,075
Provision for Doubt Debts	1,500	Krishna Capital	3,075
	6,150		6,150

Partners’ Capital Accounts
Dr.				Cr.
Particulars	Madan	Krishna	Ram	Particulars	Madan	Krishna	Ram
Revaluation (Loss)	3,075	3,075		Balance b/d	45,000	30,000
Madan’s Capital			15,000	Cash			45,000
Krishna’s Capital			15,000	Reserve	9,000	9,000
				Ram’s Capital	15,000	15,000
Balance c/d	65,925	50,925	15,000	(share of Goodwill)
	69,000	54,000	45,000		69,000	54,000	45,000

Balance Sheet as on March 31, 2014 after Ram’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Outstanding Expenses		10,000	Cash in Hand (4,000 + 45,000)		49,000
Sundry Creditors		30,000	Cash at Bank		56,000
Bank Overdraft		20,000	Debtors	30,000
Bills Payable		30,000	Less: 5% Prov. For D. Debts	1,500	28,500
Capital A/cs			Furniture (12,000 – 600)		11,400
Madan	65,925		Machinery (24,000 – 1,200)		22,800
Krishna	50,925		Building (57,000 – 2,850)		54,150
Ram	15,000	1,31,850
		2,21,850			2,21,850

WN1

Treatment of Goodwill

Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Ram’s Capital A/c	Dr.		30,000
To Madan’s Capital				15,000
To Krishna’s Capital				15,000
(Ram’s share of goodwill charged from his capital)

WN2

Distribution of Revaluation Loss

Madan and Krishna Capital Account will be debited by

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Reserve for D. Debts (80,000 × 3%)	2,400	Loss transferred to
Furniture (6,000 × 5%)	300	A Capital	2,800
Stock (12,000 – 10,500)	1,500	B Capital	1,400

	4,200		4,200

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	P	Particulars	A	B	P
Revaluation	2,800	1,400		Balance b/d	60,000	30,000
				Cash (21,000 – 9,000)			12,000
Balance c/d	79,200	39,600	12,000	Premium for Goodwill	6,000	3,000
				General Reserve	16,000	8,000
	82,000	41,000	12,000		82,000	41,000	12,000

Balance Sheet as on April 01, 2012 after P’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Free hold Property		20,000
A	79,200		Furniture (6,000 – 300)		5,700
B	39,600		Stock (12,000 – 1,500)		10,500
P	12,000	1,30,800	Debtors	80,000
Creditors		16,000	Less: 3% Reserve for D. Debts	2,400	77,600
			Cash (12,000 + 21,000)		33,000
		1,46,800			1,46,800

Working Note:

WN1: Distribution of Premium for Goodwill

WN2: Distribution of Loss on Revaluation

Question 61:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Reserve for D. Debts (80,000 × 3%)	2,400	Loss transferred to
Furniture (6,000 × 5%)	300	A Capital	2,800
Stock (12,000 – 10,500)	1,500	B Capital	1,400

	4,200		4,200

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	P	Particulars	A	B	P
Revaluation	2,800	1,400		Balance b/d	60,000	30,000
				Cash (21,000 – 9,000)			12,000
Balance c/d	79,200	39,600	12,000	Premium for Goodwill	6,000	3,000
				General Reserve	16,000	8,000
	82,000	41,000	12,000		82,000	41,000	12,000

Balance Sheet as on April 01, 2012 after P’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Free hold Property		20,000
A	79,200		Furniture (6,000 – 300)		5,700
B	39,600		Stock (12,000 – 1,500)		10,500
P	12,000	1,30,800	Debtors	80,000
Creditors		16,000	Less: 3% Reserve for D. Debts	2,400	77,600
			Cash (12,000 + 21,000)		33,000
		1,46,800			1,46,800

Working Note:

WN1: Distribution of Premium for Goodwill

WN2: Distribution of Loss on Revaluation

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Provision for Doubtful Debts	9,000
Furniture (24,000 × 5%)	1,200	Loss transferred to
Stock	6,000	A Capital	10,800
		B Capital	5,400
	16,200		16,200

Partners’ Capital Account
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Revaluation	10,800	5,400		Balance b/d	1,60,000	1,20,000
				General Reserve (2 : 1)	64,000	32,000
				Bank (84,000 – 36,000)			48,000
Balance c/d	2,37,200	1,58,600	48,000	Premium for Goodwill	24,000	12,000
	2,48,000	1,64,000	48,000		2,48,000	1,64,000	48,000

Balance Sheet as on April 01, 2013 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Capital A/cs:			Buildings		80,000
A	2,37,200		Furniture (24,000 – 1,200)		22,800
B	1,58,600
C	48,000	4,43,800	Stock (48,000 – 6,000)		42,000
Creditors		64,000	Debtors	2,40,000
			Less: Prov. For D. Debts	9,000	2,31,000
			Cash at Bank (48,000 + 84,000)		1,32,000
		5,07,800			5,07,800

Working Notes:

WN1

Distribution of Premium for Goodwill (in sacrificing ratio)

WN2 Distribution of Revaluation loss

Question 62:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Provision for Doubtful Debts	9,000
Furniture (24,000 × 5%)	1,200	Loss transferred to
Stock	6,000	A Capital	10,800
		B Capital	5,400
	16,200		16,200

Partners’ Capital Account
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Revaluation	10,800	5,400		Balance b/d	1,60,000	1,20,000
				General Reserve (2 : 1)	64,000	32,000
				Bank (84,000 – 36,000)			48,000
Balance c/d	2,37,200	1,58,600	48,000	Premium for Goodwill	24,000	12,000
	2,48,000	1,64,000	48,000		2,48,000	1,64,000	48,000

Balance Sheet as on April 01, 2013 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs
Capital A/cs:			Buildings		80,000
A	2,37,200		Furniture (24,000 – 1,200)		22,800
B	1,58,600
C	48,000	4,43,800	Stock (48,000 – 6,000)		42,000
Creditors		64,000	Debtors	2,40,000
			Less: Prov. For D. Debts	9,000	2,31,000
			Cash at Bank (48,000 + 84,000)		1,32,000
		5,07,800			5,07,800

Working Notes:

WN1

Distribution of Premium for Goodwill (in sacrificing ratio)

WN2 Distribution of Revaluation loss

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Stock	3,000	Provision for D. Debts	600
Creditors	1,000
Fixed Assets	10,000	Loss transferred to
Provident Fund	5,000	X Capital	11,500
		Y Capital	6,900
	19,000		19,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation (Loss)	11,500	6,900		Balance b/d	70,000	31,000
Profit and Loss	1,500	900		Workmen’s Comp. Fund	3,625	2,175
Balance c/d	72,625	25,375	20,000	Cash			20,000
				Premium for Goodwill	12,000
	85,625	33,175	20,000		85,625	33,175	20,000

Balance Sheet as on March 31, 2013 after Z’s admission
Particulars		Amount Rs	Assets	Amount Rs

Creditors (15,000 + 1,000)		16,000	Land and Building	5,000
Provident Fund (10,000 + 5,000)		15,000	Sundry Debtors	20,000
Capital A/cs:			Stock (25,000 – 3,000)	22,000
X	72,625		Fixed Assets (80,000 – 10,000)	70,000
Y	25,375		Cash	32,000
Z	20,000	1,18,000
		1,49,000		1,49,000

Working Notes

WN1: Distribution of Revaluation Loss

WN2: Distribution Accumulated Loss

WN3: Distribution of Workmen’s Compensation Fund

WN4: Z’s premium for goodwill will be transferred to X’s Capital Account because Z receives his entire share from X.

WN5: Calculation of New Profit Sharing Ratio

Question 63:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Stock	3,000	Provision for D. Debts	600
Creditors	1,000
Fixed Assets	10,000	Loss transferred to
Provident Fund	5,000	X Capital	11,500
		Y Capital	6,900
	19,000		19,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	X	Y	Z	Particulars	X	Y	Z
Revaluation (Loss)	11,500	6,900		Balance b/d	70,000	31,000
Profit and Loss	1,500	900		Workmen’s Comp. Fund	3,625	2,175
Balance c/d	72,625	25,375	20,000	Cash			20,000
				Premium for Goodwill	12,000
	85,625	33,175	20,000		85,625	33,175	20,000

Balance Sheet as on March 31, 2013 after Z’s admission
Particulars		Amount Rs	Assets	Amount Rs

Creditors (15,000 + 1,000)		16,000	Land and Building	5,000
Provident Fund (10,000 + 5,000)		15,000	Sundry Debtors	20,000
Capital A/cs:			Stock (25,000 – 3,000)	22,000
X	72,625		Fixed Assets (80,000 – 10,000)	70,000
Y	25,375		Cash	32,000
Z	20,000	1,18,000
		1,49,000		1,49,000

Working Notes

WN1: Distribution of Revaluation Loss

WN2: Distribution Accumulated Loss

WN3: Distribution of Workmen’s Compensation Fund

WN4: Z’s premium for goodwill will be transferred to X’s Capital Account because Z receives his entire share from X.

WN5: Calculation of New Profit Sharing Ratio

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Provision for Doubtful Debts	1,000	Machinery	3,000
Outstanding Salaries	2,000	Stock	2,000

Profit transferred to
M Capital	1,250
N Capital	750
	5,000		5,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	M	N	R	Particulars	M	N	R
				Balance b/d	12,000	10,000
Cash	1,500	500		Cash			8,000
				Premium for Goodwill	3,000	1,000
Balance c/d	14,750	11,250	8,000	Revaluation (Profit)	1,250	750
	16,250	11,750	8,000		16,250	11,750	8,000

Balance Sheet as on March 31, 2013 after R’s admission
Liabilities		Amount Rs	Assets		Amount Rs

			Machinery (12,000 + 3,000)		15,000
Outstanding Salaries		2,000	Stock (8,000 + 2,000)		10,000
Creditors		4,000	Sundry Debtors	7,200
Bills Payable		2,000	Less: Provision for D. Debts	1,000	6,200
Capital A/cs			Cash at Bank		500
M	14,750		Cash in hand (300 + 12,000 – 2,000)		10,300
N	11,250
R	8,000	34,000
		42,000			42,000

Working Notes

WN1

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2 Distribution of Premium for Goodwill

WN3 Withdrawn of Premium for Goodwill

Question 64:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Provision for Doubtful Debts	1,000	Machinery	3,000
Outstanding Salaries	2,000	Stock	2,000

Profit transferred to
M Capital	1,250
N Capital	750
	5,000		5,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	M	N	R	Particulars	M	N	R
				Balance b/d	12,000	10,000
Cash	1,500	500		Cash			8,000
				Premium for Goodwill	3,000	1,000
Balance c/d	14,750	11,250	8,000	Revaluation (Profit)	1,250	750
	16,250	11,750	8,000		16,250	11,750	8,000

Balance Sheet as on March 31, 2013 after R’s admission
Liabilities		Amount Rs	Assets		Amount Rs

			Machinery (12,000 + 3,000)		15,000
Outstanding Salaries		2,000	Stock (8,000 + 2,000)		10,000
Creditors		4,000	Sundry Debtors	7,200
Bills Payable		2,000	Less: Provision for D. Debts	1,000	6,200
Capital A/cs			Cash at Bank		500
M	14,750		Cash in hand (300 + 12,000 – 2,000)		10,300
N	11,250
R	8,000	34,000
		42,000			42,000

Working Notes

WN1

Calculation of Sacrificing Ratio

Sacrificing Ratio = Old Ratio − New Ratio

WN2 Distribution of Premium for Goodwill

WN3 Withdrawn of Premium for Goodwill

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Land and Building	20,000	Sundry Creditors	1,200
Stock	3,200	Loss transferred to
Provision for Doubtful Debts	1,000	A Capital	13,800
		B Capital	9,200
	24,200		24,200

Partnersâ€™ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Aâ€™s Capital			4,000	Balance b/d	86,000	64,000
Bâ€™s Capital			4,000	General Reserve	12,000	8,000
Revaluation	13,800	9,200		Cash			50,000
Goodwill	6,000	4,000		Câ€™s Capital	4,000	4,000
Balance c/d	82,200	62,800	42,000
	1,02,000	76,000	50,000		1,02,000	76,000	50,000

Balance Sheet as on April 01, 2014 (after Câ€™s admission)
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Land and Building (60,000 â€“ 20,000)		40,000
A	82,200		Plant and Machinery		70,000
B	62,800		Sundry Debtors	20,000
C	42,000	1,87,000	Less: Provision for D. Debts	1,000	19,000
			Stock (36,000 â€“ 3,200)		32,800
Sundry Creditors (31,200 â€“ 1,200)		30,000	Cash at Bank		4,000
			Cash in Hand (1,200 + 50,000)		51,200
		2,17,000			2,17,000

WN1: Calculation of Câ€™s share of Goodwill

Particulars		Debit Amount Rs	Credit Amount Rs

Câ€™s Capital A/c	Dr.	8,000
To Aâ€™s Capital A/c			4,000
To Bâ€™s Capital A/c			4,000
(Câ€™s share of goodwill charge from his capital)

WN2: Distribution of General Reserve (in old ratio)

WN3: Writing-off of Goodwill

Question 65:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Land and Building	20,000	Sundry Creditors	1,200
Stock	3,200	Loss transferred to
Provision for Doubtful Debts	1,000	A Capital	13,800
		B Capital	9,200
	24,200		24,200

Partnersâ€™ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Aâ€™s Capital			4,000	Balance b/d	86,000	64,000
Bâ€™s Capital			4,000	General Reserve	12,000	8,000
Revaluation	13,800	9,200		Cash			50,000
Goodwill	6,000	4,000		Câ€™s Capital	4,000	4,000
Balance c/d	82,200	62,800	42,000
	1,02,000	76,000	50,000		1,02,000	76,000	50,000

Balance Sheet as on April 01, 2014 (after Câ€™s admission)
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Land and Building (60,000 â€“ 20,000)		40,000
A	82,200		Plant and Machinery		70,000
B	62,800		Sundry Debtors	20,000
C	42,000	1,87,000	Less: Provision for D. Debts	1,000	19,000
			Stock (36,000 â€“ 3,200)		32,800
Sundry Creditors (31,200 â€“ 1,200)		30,000	Cash at Bank		4,000
			Cash in Hand (1,200 + 50,000)		51,200
		2,17,000			2,17,000

WN1: Calculation of Câ€™s share of Goodwill

Particulars		Debit Amount Rs	Credit Amount Rs

Câ€™s Capital A/c	Dr.	8,000
To Aâ€™s Capital A/c			4,000
To Bâ€™s Capital A/c			4,000
(Câ€™s share of goodwill charge from his capital)

WN2: Distribution of General Reserve (in old ratio)

WN3: Writing-off of Goodwill

Answer:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Reserve for D. Debts (27,500 × 2%)	550	Free hold Premises (22,400 – 20,000)	2,400
Stock	705	Loss transferred to
Plant and Machinery (13,500 – 11,800)	1,700	Ram’s Current A/c	717
Fixture and Fittings	210	Shyam’s Current A/c	598
Motor lorries	550
	3,715		3,715

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Ram	Shyam	Arjun	Particulars	Ram	Shyam	Arjun
				Balance b/d	30,000	25,000
Balance c/d	30,000	25,000	20,000	Cash			20,000
	30,000	25,000	20,000		30,000	25,000	20,000

Partners’ Current Accounts
Dr.								Cr.
Particulars	Ram	Shyam	Arjun	Particulars	Ram	Shyam	Arjun
Revaluation	717	598		Balance b/d	2,000	1,800
				Premium for Goodwill	3,600	3,000
Balance c/d	4,883	4,202
	5,600	4,800			5,600	4,800

Balance Sheet
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		19,000	Freehold Premises		22,400
Bills Payable		16,000	Plant and Machinery		11,800
Capital A/cs:			Fixture and Fittings		1,540
Ram	30,000		Motor lorries		800
Shyam	25,000		Stock (14,100 – 705)		13,395
Arjun	20,000	75,000	Bills Receivables		13,060
			Debtors	27,500
Current A/cs:			Less: 2% Reserve for D. Debts	550	26,950
Ram	4,883		Bank		1,590
Shyam	4,202	9,085	Cash (950 + 20,000 + 6,600)		27,550

		1,19,085			1,19,085

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Cash A/c	Dr.		26,600
To Arjun’s Capital				20,000
To Premium for Goodwill				6,600
(Arjun brought Capital and share of goodwill)

Premium for Goodwill A/c	Dr.		6,600
To Ram’s Current A/c				3,600
To Shyam’s Current A?C				3,000
(Premium for Goodwill transferred to partners current account in sacrificing ratio i.e. 6:5)

Arjun admitted for share of profit

Let the combined share of all partner after Arjun’s admission be = 1

Combined share of Ram and Shyam after Arjun’s admission

New Ratio = Old Ratio − Combined share of Ram and Shyam

Working Notes

WN1 Distribution of Premium for Goodwill

WN2 Distribution of Loss on Revaluation

Question 66:

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Reserve for D. Debts (27,500 × 2%)	550	Free hold Premises (22,400 – 20,000)	2,400
Stock	705	Loss transferred to
Plant and Machinery (13,500 – 11,800)	1,700	Ram’s Current A/c	717
Fixture and Fittings	210	Shyam’s Current A/c	598
Motor lorries	550
	3,715		3,715

Partners’ Capital Accounts
Dr.							Cr.
Particulars	Ram	Shyam	Arjun	Particulars	Ram	Shyam	Arjun
				Balance b/d	30,000	25,000
Balance c/d	30,000	25,000	20,000	Cash			20,000
	30,000	25,000	20,000		30,000	25,000	20,000

Partners’ Current Accounts
Dr.								Cr.
Particulars	Ram	Shyam	Arjun	Particulars	Ram	Shyam	Arjun
Revaluation	717	598		Balance b/d	2,000	1,800
				Premium for Goodwill	3,600	3,000
Balance c/d	4,883	4,202
	5,600	4,800			5,600	4,800

Balance Sheet
Liabilities		Amount Rs	Assets		Amount Rs

Creditors		19,000	Freehold Premises		22,400
Bills Payable		16,000	Plant and Machinery		11,800
Capital A/cs:			Fixture and Fittings		1,540
Ram	30,000		Motor lorries		800
Shyam	25,000		Stock (14,100 – 705)		13,395
Arjun	20,000	75,000	Bills Receivables		13,060
			Debtors	27,500
Current A/cs:			Less: 2% Reserve for D. Debts	550	26,950
Ram	4,883		Bank		1,590
Shyam	4,202	9,085	Cash (950 + 20,000 + 6,600)		27,550

		1,19,085			1,19,085

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Cash A/c	Dr.		26,600
To Arjun’s Capital				20,000
To Premium for Goodwill				6,600
(Arjun brought Capital and share of goodwill)

Premium for Goodwill A/c	Dr.		6,600
To Ram’s Current A/c				3,600
To Shyam’s Current A?C				3,000
(Premium for Goodwill transferred to partners current account in sacrificing ratio i.e. 6:5)

Arjun admitted for share of profit

Let the combined share of all partner after Arjun’s admission be = 1

Combined share of Ram and Shyam after Arjun’s admission

New Ratio = Old Ratio − Combined share of Ram and Shyam

Working Notes

WN1 Distribution of Premium for Goodwill

WN2 Distribution of Loss on Revaluation

Answer:

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Reserve Fund A/c	Dr.		4,000
To A’s Capital A/c				3,000
To B’s Capital A/c				1,000
(Reserve Fund distributed)

Revaluation A/c	Dr.		4,050
To Stock A/c				2,000
To Fixtures A/c				100
To Provision for Doubtful Debts A/c				950
To Outstanding Claim for Damages A/c				1,000
(Decrease in assets, increase in liability and provision for doubtful debts created)

Land and Building A/c	Dr.		5,000
Sundry Creditors A/c	Dr.		650
To Revaluation A/c				5,650
(Decrease in creditors and increase in land and building transferred to Revaluation Account)

Revaluation A/c	Dr.		1,600
To A’s Capital A/c				1,200
To B’s Capital A/c				400
(Profit on revaluation transferred to A and B’s Capital Accounts in their old profit sharing ratio)

Bank A/c	Dr.		15,000
To C’s Capital A/c				10,000
To Premium for Goodwill A/c				5,000
(C brought capital and share of goodwill)

Premium for Goodwill A/c	Dr.		5,000
To A’s Capital A/c				3,750
To B’s Capital A/c				1,250
(Premium for Goodwill distributed between A and B in sacrificing ratio i.e. 3:1)

A’s Capital A/c	Dr.		1,875
B’s Capital A/c	Dr.		625
To Bank A/c				2,500
(Half of the Premium for Goodwill withdrawn)

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Stock	2,000	Land and Building	5,000
Fixtures	100	Sundry Creditors	650
Provision for D. Debts (19,000 × 5%)	950
Outstanding Claim for Damages	1,000
Profit transferred to
A Capital	1,200
B Capital	400
	5,650		5,650

Partners’ Capital Accounts
Dr.				Cr.
Particulars	A	B	C		Particulars	A	B	C
Bank (withdrawn of Goodwill)	1,875	625			Balance b/d	30,000	16,000
					Bank			10,000
					Revaluation (Profit)	1,200	400
					Reserve Fund	3,000	1,000
Balance c/d	36,075	18,025	10,000		Premium for Goodwill	3,750	1,250
	37,950	18,650	10,000			37,950	18,650	10,000

Balance Sheet as on March 31, 2014 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Land and Building		30,000
A	36,075		Fixtures		900
B	18,025		Stock		18,000
C	10,000	64,100

Creditors (41,500 – 650)		40,850	Debtors	16,000
			Bills Receivable	3,000
Outstanding Claim for Damages		1,000		19,000
			Less: 5% Prov. for D. Debts	950	18,050
			Bank		39,000

		1,05,950			1,05,950

Question 67:

Journal
Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

Reserve Fund A/c	Dr.		4,000
To A’s Capital A/c				3,000
To B’s Capital A/c				1,000
(Reserve Fund distributed)

Revaluation A/c	Dr.		4,050
To Stock A/c				2,000
To Fixtures A/c				100
To Provision for Doubtful Debts A/c				950
To Outstanding Claim for Damages A/c				1,000
(Decrease in assets, increase in liability and provision for doubtful debts created)

Land and Building A/c	Dr.		5,000
Sundry Creditors A/c	Dr.		650
To Revaluation A/c				5,650
(Decrease in creditors and increase in land and building transferred to Revaluation Account)

Revaluation A/c	Dr.		1,600
To A’s Capital A/c				1,200
To B’s Capital A/c				400
(Profit on revaluation transferred to A and B’s Capital Accounts in their old profit sharing ratio)

Bank A/c	Dr.		15,000
To C’s Capital A/c				10,000
To Premium for Goodwill A/c				5,000
(C brought capital and share of goodwill)

Premium for Goodwill A/c	Dr.		5,000
To A’s Capital A/c				3,750
To B’s Capital A/c				1,250
(Premium for Goodwill distributed between A and B in sacrificing ratio i.e. 3:1)

A’s Capital A/c	Dr.		1,875
B’s Capital A/c	Dr.		625
To Bank A/c				2,500
(Half of the Premium for Goodwill withdrawn)

Revaluation Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Stock	2,000	Land and Building	5,000
Fixtures	100	Sundry Creditors	650
Provision for D. Debts (19,000 × 5%)	950
Outstanding Claim for Damages	1,000
Profit transferred to
A Capital	1,200
B Capital	400
	5,650		5,650

Partners’ Capital Accounts
Dr.				Cr.
Particulars	A	B	C		Particulars	A	B	C
Bank (withdrawn of Goodwill)	1,875	625			Balance b/d	30,000	16,000
					Bank			10,000
					Revaluation (Profit)	1,200	400
					Reserve Fund	3,000	1,000
Balance c/d	36,075	18,025	10,000		Premium for Goodwill	3,750	1,250
	37,950	18,650	10,000			37,950	18,650	10,000

Balance Sheet as on March 31, 2014 after C’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Land and Building		30,000
A	36,075		Fixtures		900
B	18,025		Stock		18,000
C	10,000	64,100

Creditors (41,500 – 650)		40,850	Debtors	16,000
			Bills Receivable	3,000
Outstanding Claim for Damages		1,000		19,000
			Less: 5% Prov. for D. Debts	950	18,050
			Bank		39,000

		1,05,950			1,05,950

Answer:

Revaluation Accounts
Dr.					Cr.
Particulars		Amount Rs	Particulars	Amount Rs

Outstanding workmen’s Compensation Claim		2,000	Creditors	1,500
Provision for D. Debts	1,500		Loss transferred to
Less: Old Provision	1,000	500	X Capital	500
			Y Capital	500
		2,500		2,500

Partners’ Capital Accounts
Dr.				Cr.
Particulars	X	Y	Z		Particulars	X	Y	Z
Bank (withdrawn of Goodwill)	5,000	5,000			Balance b/d	30,000	20,000
Revaluation Loss	500	500			X’s Current	8,000
					Y’s Current		6,000
					Bank			25,000
Balance c/d	37,500	25,500	25,000		Premium for Goodwill	5,000	5,000
	43,000	31,000	25,000			43,000	31,000	25,000

Balance Sheet as on March 31, 2014 after Z’s admission
Liabilities		Amount Rs	Assets		Amount Rs

Capital A/cs:			Land and Building		30,000
X	37,500		Plant and Machinery		20,000
Y	25,500		Furniture and Fittings		5,000
Z	25,000	88,000	Stock		15,000
			Bills Receivable		6,000
Creditors	26,000		Debtors	15,000
Less: Bills Payable	4,000		Less: 10% Prov. for D. Debts	1,500	13,500
Less: Revaluation	1,500	20,500	Bank		45,000

Bills Payable	10,000
Add: Creditor	4,000	14,000
X’s Loan		10,000
Outstanding Workmen Compensation Claim		2,000
		1,34,500			1,34,500

Bank Account
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs

Balance b/d	10,000	X’s Capital	5,000
Z’s Capital	25,000	Y’s Capital	5,000
Premium for Goodwill	10,000
X’s Loan	10,000	Balance c/d	45,000

	55,000		55,000

Working Notes:

WN1: Sacrificing Ratio

WN2: Distribution of Revaluation Loss

WN3: Distribution of Premium for Goodwill

TS Grewal i (2014) Solutions for Class 12 Commerce Accountancy Chapter 4 - Admission Of A Partner

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